Hedge Funds Obama Plan

Hedge Funds Obama Plan

Hedge Funds Could Be Hurt by Obama's Plan

Experts say that Obama's plan to reform commercial banks could have an adverse impact on hedge funds and private equity.  On Thursday, President Obama presented his plan to stop commercial banks and institutions owning banks from "owning, investing in or sponsoring" private equity and hedge funds which would remove a significant source for alternative asset funds.  The President is aiming to curb risk in the banking sector but private equity firms and hedge funds may pay a penalty too.
"Although the full implications of Obama's statement remain unclear, the potential disruption that such widespread reform could bring to the alternatives industry is significant, and could affect hundreds of banking institutions in the U.S. investing in alternatives," Preqin's Tim Friedman said.

If Europe follows the U.S. lead, it could have a big impact on powerful investment houses in the region's banks. If restrictions are limited to the U.S. there would still be a knock-on effect in Europe and Asia because many U.S. banks also invest in funds in those regions.

Tim Syder, deputy managing partner of U.K. buyout firm Electra, said a similar move in Europe would have a greater affect at the top end of the private equity market
Meanwhile, hedge funds worldwide may be hit by Obama's plans, say experts.
While U.S. banks are relatively small direct investors in hedge funds, representing just 0.9% (approximately $10 billion) of the total capital invested by U.S. investors, the wider effects of the proposal could be much greater, said Preqin's Friedman.  Source

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