Hedge funds have used their most prominent annual gathering – the GAIM conference in Monaco – to speak out against ”disastrous” new regulatory proposals from the European Union.
After a turbulent end to 2008 and an unhealthy start to 2009, managers and their investors are rallying round to fight off the new draft rules outlined in late April by the EU commission.
”Hedge fund managers have been quiet for a long time on regulation because I think there’s a general assumption that it won’t come to pass,” said one fund manager.
”We’ve assumed that the political will will follow the economic will. Historically that’s wrong. And now lots of us are beginning to think that maybe we’ve been a bit complacent.”
The EU commission’s draft directive on alternative investment fund managers controversially proposes limits on fund leverage and would require funds to be registered in EU countries in which they have investors.
As well as speaking out against the EU, attendees at GAIM have also criticised an apparent lack of action from the UK government on the issue.
Several fund managers said they had previously had confidence in the UK’s ability to resist punitive regulation from Brussels, but were now fearful that the Brown government was too politically distracted to act decisively.
”The [Financial Services Authority]’s hedge fund regulation has actually always been very good, and the UK has the infrastructure, the capital markets and the prime brokerages that make it ideal for hedge funds. But now we risk driving them out,” said Simon Luhr, the managing partner of London-based SW1 Capital.
”The prime minister can’t stand up for himself right now… I think it’s going to be a disaster.”
Three quarters of Europe’s hedge fund-managed assets, worth around $300bn, are managed out of London.
Other managers, though, were much more sanguine. Lobbying efforts have intensified in recent weeks and a considerable amount of behind-the-scenes work was going on said one major London-based fund partner. ”I think people just need to be a bit patient. It’s only the first draft of the new rules,” he said.
Comments from City minister Lord Myners – himself an investment management industry veteran – have also given some in the industry comfort. Myners criticised the EU proposals as ”naive” when they came out.
Pierre Lagrange, a founding partner of GLG, one of the largest and most successful funds in Europe, was, meanwhile, more openly supportive of London’s future as an alternative asset management hub.”My wife and I are actually planning a party to celebrate 20 years of living in London,” he told delegates in a keynote speech.
”Even in the current political climate we will stay there.”
