BOSTON -- As finance ministers in Europe consider proposed rules to toughen the regulation and oversight of alternative-investment funds, hedge fund and private-equity fund lobbyists are hoping members of the European Parliament are still open to compromise.
The new rules aim to extend bank-style remuneration rules to asset managers, increase responsibility for prime brokers who have custody of client assets and give regulators more oversight of funds' leverage and capital ratios.
European Union leaders are expected to vote on the new rules in July, but many have indicated a willingness to cooperate with the industry to create an ideal situation for everyone.
Financial industry leaders and policymakers should never underestimate the importance of building good will, said Charlie McCreevy, former EU Commissioner for Internal Markets, speaking at the 21st Annual Conference on the Globalisation of Investment Funds, held this year at the Boston Harbor Hotel.
“Most politicians forget how much the people at the top really know,” he said, “and most people in the finance departments have never worked on the other side.”
Alternative-investment managers are hoping to get their products approved as UCITS (Undertakings for Collective Investment in Transferable Securities), the structured products that can be traded among participating member countries in Europe, Asia and Latin America.
The two largest groups of hedge fund investors in Europe are funds-of-funds (28%) and private-sector pension funds (27%), followed by the public-sector pension funds (12%), insurance companies (8%), and asset managers (8%), according to a new report by the international strategy consultant Celent.
"There was a decline of around 10% in the hedge funds that invested in Europe between 2004 and 2009," Celent said. "The fall in investments in Europe points to a tougher environment for the prime brokers, with consolidation on the horizon. In order to meet the needs of hedge funds, brokers need to be more transparent and flexible in their approach than before."