Oh, how pension fund trustees must wish they could turn the clock back to the halcyon days of plump scheme surpluses, pension holidays (remember them?) and the promise that every worker could retire with a nice fat, index-linked income, guaranteed to the end of their days.
Barring the invention of the time machine, such delights are doomed to remain just a wistful memory (and in reality access to the nirvana of generous defined benefit occupational pension schemes was far from universal).
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.
Lord Myners: criticism
Various fund managers have owned up to being a bit pathetic when it came to challenging powerful banking figures. They have been roundly castigated by the likes of Lord Myners and Hector Sants for their failure to act as responsible owners, and cannot expect to escape notice in Sir David Walker’s review of corporate governance in the banking industry when that is published later this week.
No doubt they could and should have been a bit less accommodating of banks’ plans for world domination, but in the end there is limit to the sanction they can apply. Passive trackers, which probably hold the biggest stakes, cannot threaten to sell, and active managers rarely hold large enough stakes to make selling much of an issue for a company.
It's not just banking regulation that needs tightening
It’s not just banking regulation that needs tightening but private pension schemes are badly in need of better governance and stronger oversight.
The OECD is calling for both in new guidance issued today, rolling out a blueprint with recommendations on governance, funding, investment and the rights of pension plan members.
Party on: Linzi Stoppard from Fuse
The party atmosphere was definitely lacking in Monaco this year for Fund Forum. Numbers were down and the usual lavish entertainment had been credit crunched. Still, the organisers professed themselves pleased with the turnout, and with the numbers of chief execs who turned up to sit on panels or address the conference.
Some providers were still doing things in style, but they were mostly the asset servicing arms of the banks. I enjoyed an evening at a swanky hotel by the sea courtesy of BNY Mellon, including a performance by electric violin duo Fuse. It was just right for Monaco!
Lord Turner warned hedge funds might become a target in Europe
Even the European Commission’s own experts think it is going too far with its proposals for regulating the hedge fund industry.
Jaques de Larosière, author of an influential report on financial supervision, told a seminar in London the Commission’s draft directive on alternative investment management went much further than he had recommended. The report came to the conclusion hedge funds were not a systemic issue, but the draft directive proposes regulating some aspects of alternative funds even more tightly than Ucits, the retail investment vehicle.
As leader of a ‘High Level Group’, one might expect M. de Larosière’s words to have some weight.
The seminar, hosted by Business for New Europe, also heard from Lord Turner, chairman of the UK’s Financial Services Authority, who warned hedge funds might become a “target” in Europe, and Lord Myners, the UK financial services secretary to the Treasury, who called the directive “flawed”.
The Alternative Investment Management Association welcomed these comments – as well it might!
UK is bringing out its big guns
The UK is bringing out its big guns in an attempt to shoot down the European Commission’s proposed rules for alternative investment fund managers.
In Monaco, Dan Waters, asset management sector leader at the Financial Services Authority, fired broadsides at several aspects of the directive in a speech at the Fund Forum conference.
Fund Forum in Monaco: numbers are significantly down on previous years
Anecdotal evidence has it that attendance at Fund Forum in Monaco this week is significantly lower than in previous years. Some say numbers have halved. Last time I came, two years ago, it was certainly much busier. But what is lacking in quantity is made up for in quality, apparently – the CEOs are here in force.
So are the service providers. I shared a cab from the airport with a woman from SimCorp, have met today with BNY Mellon and JPMorgan, and turned down meetings with Liquidnet, Clearstream and Swift ( I prefer to focus on fund managers at a fund management conference).
There are plenty of issues to occupy the service providers. One that came up at a session today was the question of depositary bank responsibility. The European Commission has raised the possibility of making depositaries stand as guarantors for fund assets, making restitution to investors if money goes astray. This is in response to the issues raised by the Madoff affair, which in Europe focused on a few Ucits funds that invested with Madoff and awarded the sub custody of assets to Madoff as well, so the money disappeared.
One view I have heard is that there is no point even discussing the outcome of such a move as it won’t happen: the regulators are not crazy enough to expect anyone to stay in the business if they have to provide a blank cheque.
Perhaps they are right. But listening to the debate at the session I attended, it seems there is no clear view in the industry of what needs to be done to clear up the grey area in the Ucits rules the Madoff area highlighted. Is it an issue just for Luxembourg and Dublin or a wider one for Ucits?
Threatening to make major changes to the responsibilities of depositary banks has at least started a debate on the issue.
Anecdotes included harrowing tales from Papua New Guinea
M&G, that most venerable of fund houses, provided some fascinating insights into the changing nature of investment at a dinner this week.
M&G was celebrating the 40th anniversary of its £3bn Recovery fund and wheeled out all three past and present managers of said vehicle to reminisce in the convivial setting of its grandly titled Governor’s House.
The contrast between the trio’s tall tales was stark.
Vulture funds... face having their wings clipped
Flush with their success in shepherding the global economy in recent years, the planet’s munificent politicians are anxious to spread their wings and treat yet more arenas of human endeavour to their undoubted magnificence.
Hedge funds and private equity are both set to benefit from “improved” regulation, courtesy of the searing insights of our political masters, and now it appears politicians in both the US and UK are anxious to clip the wings of vulture funds.
For the uninitiated, these vehicles specialise in buying up the sovereign debt of impoverished or recalcitrant developing nations that have defaulted, or are perceived to be likely to do so, at a chunky discount to face value.