Funds Hub

Greece to welcome hedge funds?

Interesting report in the Telegraph that debt-laden Greece may have to turn to hedge funds for support in its next dollar bond issue.

Having effectively tried to exclude them from recent issues, a u-turn looks likely if it wants to raise anything like what it hopes, the paper says.

Such a report will no doubt be seized upon by the hedge fund lobby, who argue that hedge funds often step into markets as buyers when liquidity is scarce.

And it will be fascinating to hear any reaction from European politician Poul Nyrup Rasmussen, who in a visit to London last month accused hedge funds of raising Greece’s borrowing costs by 2.5 percent (a charge, it must be said, that was vigorously denied by the industry).

Rasmussen told a conference that “we cannot live with it (hedge fund speculation on CDS) anymore” and called for a ban or at least a limit, while a number of politicians have criticized hedge funds who buy the CDS without owning the underlying bond.

However, it seems unlikely that any purchase of the latest issue of Greek bonds would be driven by hedge funds’ willingness to comply with this…

Rasmussen gives the bankers both barrels

Poul Nyrup Rasmussen’s visits to London are always value for money, and today was no exception as the president of the party of European socialists launched into a tirade against banker bonuses.

“When I listen to you it’s like you’re living in another world,” he told an audience of financial executives and journalists at a Chatham House conference after a number of questions from the floor suggested EU plans for tighter regulation might be counter-productive.

“Have you heard about the recession? Do you know that we have lost 7 million jobs in Europe? Do you know that?

“Do you know that thanks to society you’re still sitting here. They are the ones who are bailing out the banks and you’re still insisting that you should have your bonuses on taxpayers’ money.

“Can you understand the seriousness of people’s anger? I don’t hear any indication of your understanding of that, and that’s a problem for you. Because if you don’t listen and if you don’t honestly go into a discussion on how to make real regulation but insist that you should not have regulation … that’s not a sustainable point.

“So in your own interests, can I give you good advice? Sit down at the table and start by recognizing that you have had a co-responsibility and a heavy one in the reasons behind the mess we are in right now… It is inevitable for me to say you are going to have regulation.”

AIMA claims “broad consensus” on EU hedge fund directive

For UK-based opponents of the controversial EU hedge fund directive, there are signs the draft could be overhauled.

Hedge fund industry body AIMA said today “there is now a broad consensus among European policymakers that the directive does need a lot of work and that there will be significant revisions”.

The group has been campaigning vigorously against the draft law, which proposes controls on leverage, which service providers can be used and where funds can be sold, and says it should instead focus on three areas — registration and authorisation, reporting of systemically-relevant data and a workable passport.

Given UK-based hedge fund managers are already regulated by the FSA and AIMA has already put forward proposals on reporting hedge fund positions to regulators, this would be a much-watered down version of the directive.

Meanwhile, Ken Clarke, shadow business secretary for the UK opposition Conservative party, told The Times he didn’t think hedge fund managers were genuinely concerned about the proposed new rules as they would be diluted through ordinary negotiations, although AIMA said “to declare an early victory is very premature”.

Nevertheless, there is a marked change of tone in the UK. The next step will be to see if that change is reflected when supporters of the Directive such as Poul Nyrup Rasmussen next lay out their position.

(See also NAPF takes aim at EU AIFM draft and Onshoring the hedge fund industry)

NAPF takes aim at EU AIFM draft

The hedge fund industry’s anger at the EU’s Alternative Investment Fund Managers directive is hardly new now, but there are growing signs of discontent from another group — the pension funds that actually put their money into hedge funds.

Last week we reported USS (the Universitied Superannuation Scheme) and Hermes, which manages BT’s pension scheme, were criticizing the draft laws for potentially limiting their investment choice and upsetting portfolio balance.

Now the NAPF (the National Association of Pension Funds) has written to Charlie McCreevy, European Commissioner for Internal Market and Services, saying the directive could reduce choice and increase costs, while expressing concern about the model of regulation being proposed.

The hedge fund industry has quickly mobilised itself to criticize the directive and lobby for extensive revision, but, as it found earlier this month when Poul Nyrup Rasmussen, president of the EU assembly’s socialist bloc, spoke at a debate in the City, many supporters of the directive are already fully aware of hedge funds’ opposition to the plans.

While some sort of directive and tougher regulation looks inevitable, the hedge fund industry must be hoping that EU lawmakers will heed more closely the voices of pension funds representing savers across Europe when they decide what rules hedge fund firms will have to play by.

Tilting at windmills

The growing discomfort among pension funds over EU plans to regulate the hedge fund industry has prompted another public pronouncement, this time from Dutch schemes with assets of about 450 billion euros, including APG and PGGM.

We’ve noted the potential pivotal role the pension industry could play before, but as yet there hasn’t been an appreciable softening in the tone adopted by the hardliners. Their standard bearer Poul Nyrup Rasmussen called London Mayor Boris Johnson “out of touch with reality” after the much-lobbied blonde tried to strike a blow for the alternatives industry on a vist to Brussels this week.

It is notable though that the Dutch funds have deliberately sought to divorce themselves from the frenetic efforts of the hedge funds and private equity funds, instead pleading to MEPs as ‘users’ of the industry.

Speaking to Global Pensions, APG compliance officer Gerben Everts said: “Unlike suggestions in the proposal, we do not think the protection envisaged by the directive is really beneficial for us, as professional investors.”

He urged more transparency among hedge funds, and echoed warnings by the UK’s largest pension scheme and the British trade body for pension schemes that the rules as they stand could lead to higher pension premia and lower payouts — difficult conclusions to ponder for a socialist parliamentarian aware of the problems posed by Europe’s ageing population.

Europe – The Final Countdown

The war of words is hotting up in the days leading up to next week’s draft EC directive on hedge funds and private equity.

The publication date has already been postponed from this week, with suggestions of last-minute exchanges between those in the tough regulation camp and those in the free market camp.

AIMA has today come out with its views on the draft directive, and it goes right to what it sees as the heart of the issue, attacking the way the draft was “rushed through”, the lack of consultation, “undue political pressure” on the drafting and the “baffling” volume of political rhetoric.

The has certainly been no shortage of political posturing in recent months, with France’s Nicolas Sarkozy and Germany’s Angela Merkel calling for hedge fund regulation, and leaders such as Barack Obama and Gordon Brown at the G20 Summit holding up the prospect of hedge fund rules.

How exactly the EC’s plans will fit in with what the G20 is proposing is still unclear, but what is very clear is the size of the chasm between the two sides – Poul Nyrup Rasmussen, a member of the EU assembly who has already criticised the EVCA’s code for private equity, today responded by saying the “this proposal has already been delayed too long”  — even if he considers the draft to be ”unacceptably weak”.