Funds Hub
Money managers under the microscope
Morning Line-Up: Hedgies attack euro, cling to fees
News and views on the hedge fund industry from Reuters and elsewhere:
Big hedge funds shorting the euro - Wall Street Journal
Hedgies seek clarity on new Singapore regulations - BusinessWeek
Ex-director of ops for Madoff charged - Reuters
Hedge funds resist cutting fees - Financial Times
IOSCO publishes systemic risk data requirements - Hedgeweek
One big mess
As you’ve probably noticed, there’s no shortage of regulation in the wake of the biggest financial crisis in 80 years.
IOSCO has been fleshing out pledges made by G20 leaders while the European Commission has put forward its highly-controversial draft law on hedge funds and private equity. Meanwhile the EU is formally reviewing MiFID next year.
Some critics already say there has been little consultation with the industries affected and insufficient co-ordination between the different regulatory bodies.
According to Louise Forrester, consultant at law firm Gide Loyrette Nouel, this result is, rather unfortunately, likely to be one big regulatory mess that wily firms will be able to take advantage of.
“MiFID 2 talks are starting at the end of this year… There is momentum which is unfortunately going to mean more and more chipping away at positions that from a regulatory point of view people thought were agreed,” she said.
“The problem is that there are so many different streams of regulation that it’s difficult to make them tie in with each other… It’s just not going to match, that’s the problem. There will be arbs (between different regulations) — those institutions who have worked out which path is the best one.
“It’s going to be a mess for a horrible long time.”
Here’s the caption in full: “Revellers fight in tomato pulp during the annual ‘Tomatina’ (tomato fight) in the Mediterranean village of Bunol, near Valencia, August 30, 2006. The origin of the tomato fight is disputed – everyone in Bunol seems to have a favourite story – but most agree it started around 1940, in the early years of the dictatorship of General Francisco Franco.”
A walk in the park
Hedge fund industry group AIMA today gave a relatively warm welcome to IOSCO’s regulatory plans.
After draft laws from the European Commission, which have been attacked by almost the entire UK hedge fund industry, IOSCO‘s proposals — including registration of managers, disclosure of systemically-important information to regulators, registration and supervision of prime brokers — must seem like a walk in the park.
IOSCO’s principles follow the G20 pledge in April to regulate the hedge fund industry. While hedge funds did not cause the credit crisis, the group says, they may have amplified its effects.
However, with so much regulation being put forward at present, AIMA is being very careful to point out any potential problems.
“We are concerned that these recommendations may lead regulators to seek quantity rather than quality of data,” the group says.
With regulators having been caught short in cases such as Madoff and Northern Rock during the credit crisis, merely collecting piles of information is of little use if it is not examined and acted upon in the right way.
Blowin’ in the wind
The timing of the Alternative Investment Management Association’s hedge fund disclosure initiative indicates just how strong the winds of change are blowing in hedge fund land.
Coming just a day after ECB President Jean-Claude Trichet called the credit crisis “a loud and clear call” for extending hedge fund regulation, the move shows the hedge fund industry feels it must be more active in deciding the future shape of regulation.
The move, which will include regular — probably quarterly – disclosure of systemically significant holdings and risk exposure to national regulators, goes further than that suggested at last month’s Treasury Select Committee by Marshall Wace chairman and Hedge Fund Standards Board trustee Paul Marshall, who had proposed aggregating data through prime brokers.
“The international agenda is starting to gallop away… We can see which way the wind is blowing and we want to exercise leadership,” said AIMA CEO Andrew Baker, adding the proposals had been in the pipeline since early in the new year.
But AIMA’s drive to do this also serves to highlight the low number of funds that have signed up to the HFSB’s voluntary code – a fact seized upon by last month’s Treasury Select Committee.
AIMA is proposing unifying all the industry standards — AIMA, the HFSB, IOSCO, PWG and MFA — into one code. Their fear is that regulators may do this for them.
