Money managers under the microscope
Yesterday I optimistically predicted hedge funds would learn a lot more about their regulatory fate as the G20 drew to a close.
That wasn’t exactly incorrect — the industry did find out for example that regulation and oversight will be extended to “systemically important hedge funds”.
But, as with many political statements, the devil is in the detail — or in this case, the lack of it.
“The G20 communiqué is unclear as to whether their aim is to have further regulation and oversight of the funds themselves or of the managers who manage the funds,” says Robert Mellor, UK hedge fund leader at PricewaterhouseCoopers.
After months of rhetoric by political leaders and behind-the-scenes manoeuvring by trade bodies, the hedge fund industry is finally set to learn its regulatory fate today.
There has been no shortage of calls from continental European leaders such as Angela Merkel and Nicolas Sarkozy for regulation of the hedge fund industry to limit potential systemic risks to the global financial system.
But it’s little surprise that some executives in London, where the vast majority of European hedge funds are actually based, have privately suggested the calls stem from motives rather more mixed than simply wanting better regulation.
Next week sees Reuters running its annual Hedge Funds & Global Equity Summit from 23rd-25th March, with some top speakers lined up.
Given the amount of political posturing in recent months, few hedge fund managers would deny that more regulation is coming. The question seems to be what will it look like when it finally arrives?
While the weekend’s meeting of G20 finance ministers in Horsham was dismissed by some as a damp squib, it did at least in the area of hedge funds paint part of the picture of what future hedge fund regulation might look like.
Executives in London’s Mayfair, home of the UK’s multi-billion dollar hedge fund community, could be forgiven for a few raised eyebrows after British Prime Minister Gordon Brown’s call yesterday to outlaw shadow banking systems and offshore tax havens.
“You are also restructuring your banks. So are we.” he told U.S. Congress. ”But how much safer would everybody’s savings be if the whole world came together to outlaw shadown banking systems and offshore tax havens.”
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.
It may not have been a massive surprise, but ECB President Jean-Claude Trichet had an unwelcome message for hedge fund managers today.
The current crisis is, apparently, “a loud and clear call” to roll out regulation to all important market players, “notably hedge funds and credit rating agencies”.
As politicians and regulators worldwide prepare a new blueprint to marshall the hedge fund industry, the organisers of the GAIM industry conference release the early agenda for their annual Monaco pow wow.
Unsurprisingly, the June 16-18 summit takes the theme: Transformation In A New World Order. And even less surprisingly, several sessions are set to ponder how to best snag a new breed of circumspect investors, and how to adapt to a new regulatory environment.