Hedge funds may quit UK over draft EU laws
By James Mackintosh and George Parker in London and Nikki Tait in Brussels
Published: June 3 2009 23:34 | Last updated: June 4 2009 10:38
Some of Britain’s biggest hedge funds have warned the UK Treasury they will be forced to leave the country unless a draft European directive is radically changed.
Some have already begun back-up preparations to move to Switzerland in case the rules – described by one manager as a “French plot against London” – are not rewritten. New York is also a possible destination, according to another.
The warnings come as hedge funds step up their campaign against the draft directive on alternative investment fund managers, which was modified at the last minute to require the European Commission to set a limit on borrowing. Private equity firms are also fighting the rules.
Ian Wace, co-founder of hedge fund manager Marshall Wace, told the Treasury this week it should modify tax rules to allow the thousands of Cayman Islands-based funds to move to be fully regulated in London, rather than have much of the industry abandon Europe.
“If this directive goes through as drafted, large chunks of the industry will be leaving Europe, whereas we have the opportunity today to have large chunks of this industry coming to Europe,” he said.
At a meeting organised by Dan Waters and Henry Knapman of the Financial Services Authority and Tom Springbett, a Treasury representative, officials reassured almost a dozen of London’s top managers they would fight for changes.
Managers present included Mr Wace, Jon Aisbitt, chairman of Man Group, Hugh Sloane, co-founder of Sloane Robinson, David Stewart, chief executive of Odey Asset Management, and executives from the London arms of America’s Tudor Investment Corp, Citadel and Och-Ziff.
People present said the FSA officials accepted that the “killer” rules limiting borrowing – and defined to include the implicit borrowing built in to derivatives – would make popular strategies such as global macro, made famous by George Soros, impossible. But the FSA and Treasury argued the definition of borrowing was so “obviously ridiculous” it was bound to be rewritten, one official said.
Lord Myners, City minister, accused the European Commission of producing “naive” proposals.
Speaking to MPs, he said the draft directive “did not conform with the best practice of consultation” and he was confident it could be improved.
Copyright The Financial Times Limited 2009
Hedge fund regulation
Published: April 1 2009 09:23 | Last updated: April 1 2009 19:52
Hedge fund, succumb. Pools of capital from supposedly sophisticated investors will no longer roam free. US Treasury secretary Tim Geithner wants all sizeable funds to register with the Securities and Exchange Commission. This is hardly onerous. It would effectively reinstate powers the SEC had before the courts intervened in 2006. Inspection of internal controls, for example, is also uncontroversial given the post-Madoff focus on investor protection.
Mr Geithner, however, also wants information to assess possible systemic risks. That is more complex. First, given hedge funds’ protective attitude to their trading secrets, regulators will need to distinguish between the increased transparency they require and that made available to the public. Second, existing trading reports exclude over-the-counter derivatives and consist of forms capturing the what without the wherefore (a short position could be a hedge or a negative bet on a stock’s prospects). But even with improved information, regulators would still struggle to assemble a picture of the hedge fund universe. Without that, they cannot spot so-called “crowded trades”, which prove problematic when everyone tries to exit at once. Extra data from prime brokers and exchanges, say, could help.
Man Group chief warns on hedge fund regulation
By James Mackintosh, Hedge Fund Correspondent
Published: March 26 2009 08:27 | Last updated: March 26 2009 19:03
Increased regulation of hedge funds will drive some out of business and lead to a shrinkage of the industry, according to the chief executive of Man Group, the UK’s biggest listed hedge fund manager.
Peter Clarke said smaller managers who did not have the resources to cope with additional demands from watchdogs would be hit hardest. He said Man, which estimated that pre-tax profits for the year to the end of this month would drop to a third of last time’s level, was well-placed to cope with additional controls.
Lex: Man Group – Mar-26
Lex: 3i – Mar-26
Banks and miners lift FTSE amid bad news for retailers – Mar-26
FT Alphaville: Man Group makeover – Mar-26
3i signals new writedowns to asset portfolio – Mar-26
In depth: Hedge funds – Mar-26
His comments come as regulators around the world draw up plans to clamp down on hedge funds. Details remain sketchy but the US and Europe have both said they want increased disclosure and tighter risk controls, and the topic is on the agenda for the G20 meeting next week.
“It will undoubtedly cause continued acceleration of the reduction of the size of the industry,” Mr Clarke added. “It means a difficult life for some of the underlying hedge fund models.”
Man joined yesterday the wave of hedge funds axing staff, as it cut about 270, or 15 per cent, of its workforce.
The company is adjusting to a 36 per cent fall in its assets under management in the past year to $47.7bn (£33bn), with an 11 per cent drop since the end of December. Man said it was merging its two fund of hedge fund divisions and rebranding them, in an effort to double the 70 hedge fund managed accounts it runs, which provide better transparency by bypassing the funds.
Mr Clarke said this was unrelated to damage done to its RMF brand by $360m lost in the Bernard Madoff fraud, which he said had not led to significant investor withdrawals.
Shares in the company rose 11½p to 219p as Man’s trading statement showed lower-than-expected redemptions in the past three months. Pre-tax profits for the year were estimated at $1.2bn, excluding $497m of one-off costs and impairments, against $2.1bn the previous year.
Man’s effort to cut costs, which it said would be down $60m a year, is part of a widespread retrenchment by hedge funds after the industry’s worst year on record. According to Options Group, a New York headhunter, hedge funds will chop 14 per cent of their staff, or 20,000 jobs, this year, after 10,000 jobs went last year.
Mr Clarke said the company hoped to capitalise on its size and experience running managed accounts.
Copyright The Financial Times Limited 2009