Apparently more than a thousand amendments have been tabled for the Alternative Investment Fund Management directive, Brussels’ attempt to bring private equity and hedge funds under its loving control.
This unprecedented level of rewriting during the legislative process is a testament to the inexorable sway of the alternative asset management industry. The original, draconian, draft of the AIFM was seen as a shy at the ever popular Aunt Sally of hedge funds, or ‘locusts’ as they are known in Germany. The usually painstaking and thoughtful asset management unit of the European Commission’s internal markets division had apparently come under political pressure to bring out a hardhitting draft directive in a hurry.
At leisure, however, even the European Parliament found regulating a European hedge fund industry too harshly might not be that good an idea. Its own impact study found implementation of the proposed directive as it stood could result in a 0.2 per cent contraction in the combined GDP of the European Union.
Possibly, however, the initial announcement and pained squawks for the industry were enough to satisfy the hedge fund haters, and now the tedious work of actually piecing together something actually workable can be done out of the glare of the media spotlight.
Certainly the number of journalists prepared to dig through all 1000+ amendments is likely to be as slim as the number of readers prepared to read about them.
The arrival of really expensive funds in the Ucits space, notably those being launched by hedge fund managers, makes the funds run by traditional long-only managers look quite reasonable.
Where is financial innovation coming from in these days of (slightly) chastened banks? Look no further than index providers. The profit to be made from joining the index game has tempted Thomson Reuters to throw its hat into the ring, as we reported in FTfm yesterday.
Now S&P has announced an intriguing new securities lending index series, designed to measure the average cost of borrowing US equities. What does it portend when an activity like securities lending gets its own index? S&P says it is bringing transparency to opaque over-the-counter transactions, and providing both lenders and borrowers with a means of hedging (against rate increases that would decrease revenue streams or against costs, respectively). The indices can also be used to speculate on the direction of markets, S&P points out.
The ingenuity of index providers knows no bounds. What next? An index of bank bonuses or CEO pay perhaps? Tracking those might be worthwhile!
Just about everyone would like to make some amendments to the proposed EU regulations for the alternative investment industry, from hedge funds to governments, industry consultants and pension schemes.
The latest laments come from Mercer, the pension consultants, and their pension fund clients who agree the industry needs improvement and better supervision but call for Brussels to take a broader look outside the EU to see what is happening to the industry on a global regulation front.
The European Union’s draft rules on alternative investments have drawn a storm of protest from hedge funds, equity funds and even investment trusts. Today, the global hedge fund industry association took the battle a step further.
Such a ruling will make it so difficult and expensive for non-EU funds and managers to access the EU market that it would have huge consequences, particularly in North America and Asia Pacific, the Alternative Investment Management Association warns.
just like a hedgie
Why is running a hedge fund like competitive surfing? Apparently, it’s a mixture of the length of your wave and how aggressive your moves are.
That is the opinion of Pedro de Noronha, one of the few who have done both for a living. Mr de Noronha, who left surfing for the world of financial services because he wanted more intellectual stimulation, says the kind of strategic thinking that stood him in good stead while on a board helps in managing Noster Capital, his hedge fund.
Was it all a dream?
I had to pinch myself to make sure I was awake. I was having lunch with the head of equities from a German fund manager at a Conran restaurant near Tower Bridge. I had asked what trends he saw and the answer flowed as smoothly as the sparkling Perrier.
“I predict a convergence between traditional and alternative fund managers, as long-only managers start to incorporate the new techniques available under Ucits into their toolkit. There is also a blurring between institutional and retail – all these boundaries are blurring,” he said.
This visionary also thought it was possible some investors would ask for more account to be taken of sustainability principles in investing, while he had heard of ETFs, but didn’t think they were likely to take off.
It was as if the whole of the last 18 months had been a dream.
If the high-powered hedge fund world is anything to go by, the worst appears to be over for the beleaguered investment industry.
Despite the fact that hedge funds were not to blame for the spectacular implosion of the global financial system, the sector copped more than its share of the fallout, with poor performance, widespread redemptions, gating, suspensions and Madoff combining to make a veritable toxic cocktail.