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Hedge Funds Volcker Rule

Hedge Funds Volcker Rule

Investment Banks May Have To Drop Hedge Fund Assets

By now you're probably as tired as I am of the financial reform bill but it will have important implications on the hedge fund industry.  The latest report says as part of the reform, investment banks
may have to unload hedge fund accounts.  The Volcker Rule--created by presidential adviser Paul Volcker--seeks to limit banks' ownership positions in hedge funds or private equity funds.

Initially it was thought that banks would be able to keep the hedge fund and private equity accounts for their clients as long as the bank was not directly invested but now it seems that the former scenario is a possibility.  One analyst predicts a "huge fire sale" of private equity and hedge fund assets as a result of the Volcker Rule which could have big implications on the alternative asset industry

Initially, the big banks believed the hedge fund and private equity aspect of the rule would have minimal impact on their bottom lines; banks believed it would only force them to unwind funds where firm money is in play, and they could still manage these accounts for clients. But now, as the financial-reform bill gets closer to becoming established law (it still needs to be reconciled by the House and the Senate and signed into law by President Obama) executives at the big banks aren’t so sure. They say the way the Volcker Rule is currently written may require them to sell off all their hedge funds and private equity accounts, even those where firm money doesn’t exist.
Even without the most far-reaching interpretation of the Volcker Rule, one analyst told FOX Business that “tens of billions of dollars” of private and equity and hedge fund assets will be sold in the coming years because of the new legislation. If interpreted broadly, that number will be multiplied several more times, this analyst said.  Source

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