Hedge Fund Managers Pay in 2009

David Tepper Tops Hedge Fund Managers Pay in 2009

There were--and still are--some rumors that compensation for hedge fund managers and staff would fall significantly following the recession. A new survey shows that hedge fund pay has stayed at a highly competitive level, especially after the large gains across the industry in 2009.

Today AR: Absolute Return+Alpha magazine released the top 25 earners in the hedge fund industry. The highest paid 25 earned a collective $25.3 billion with the lowest individual payout in 2009 at $350 million. It probably is little surprise that David Tepper tops the list. It's clear that compensation, at least for the managers of hedge funds, is still very high.

That strategy handed Mr. Tepper...the top spot on the annual ranking of top earners in the hedge fund industry by AR: Absolute Return+Alpha magazine, which comes out Thursday. His investors did not do badly, either — Mr. Tepper’s flagship fund gained more than 130 percent last year.

The runner-up in the ranking was George Soros...his fund, Quantum Endowment, grew 29 percent in 2009, earning Mr. Soros $3.3 billion in fees and investment gains.

But in a startling comeback, top hedge fund managers rode the 2009 stock market rally to record gains, with the highest-paid 25 earning a collective $25.3 billion, according to the survey, beating the old 2007 high by a wide margin.

The minimum individual payout on the list was $350 million in 2009, a sign of how richly compensated top hedge fund managers have remained despite public outrage over the pay packages at big banks and brokerage firms. Source

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Sports Hedge Fund

Centaur Launches Hedge Fund Investing in Sports Betting

A new specialty fund has arrived just in time for the college basketball finals. Centaur Corporate announced plans to launch a hedge fund investing in sports betting. The Galileo Fund hopes to do better than other gamblers by betting unemotionally. As Centaur's managing director notes, "This provides a great opportunity for a clinically-minded group."

Centaur Corporate will launch a new hedge fund investing in an odd asset class, if it can even be so called: sports betting. The firm’s new Galileo Fund won’t be buying shares in sports books or online betting exchanges, but will actually gamble on them.

Galileo is counting on its fellow “in-running” gamblers—those betting on events already in progress—to be too emotional to bet wisely, offering it a chance to get better odds.

“It’s more an entertainment for them,” Tony Woodhams, managing director at London-based Centaur, told the Financial Times. “This provides a great opportunity for a clinically-minded group.”

The new fund will bet on soccer, racing and tennis on online exchanges, according to the newspaper. It will be regulated in Gibraltar and be open only to experienced investors. Source

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Guillaume Rambourg Suspension

Gartmore Suspends Hedge Fund Manager Amid Investigation

Gartmore, an investment fund firm in the UK, has suspended a top hedge fund manager a violation of "internal procedures." The firm had a talk with the Financial Services Authority, the regulator which is conducting an investigation into possible insider trading, and decided to suspend Guillaume Rambourg. The news sent Gartmore shares down by as much as 30%.

UK fund firm Gartmore (GRTR.L) suspended a top fund manager on Tuesday as it probed a breach of internal procedures, sending shares plunging to almost half the level at its initial public offering three months ago.

In a statement, Gartmore said Guillaume Rambourg, a close colleague of Gartmore's most high-profile fund manager Roger Guy, was suspended pending the outcome of an internal investigation into whether he had been "directing trades".

Gartmore declined to say officially what "directing trades" referred to, but a company source said the probe had related to favouring certain brokers when carrying out dealings.
The source also said there was no timeframe for an end to the investigation, and that no other Gartmore fund managers were under scrutiny. Source

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Dubai Shariah Hedge Fund

Dubai Shariah Asset Management Hedge Fund Launches

An interesting new fund has opened its doors to investors. Dubai has announced the opening of its Shariah hedge fund, Dubai Shariah Asset Management, after a stellar performance by last year's first fund of funds. The fund of funds outperformed indexes, returning 41% in 2009, solidifying hopes that the hedge fund will perform similarly. Launching hedge fund is a notable change in the region's investment preferences--money tends to go toward more long term investments like real estate and buyout funds.

Fund operator Dubai Shariah Asset Management, or DSAM, sees this as proof that a hedge fund based on Islamic law, or shariah, can provide similar or better returns than conventional hedge funds.

Portfolio managers at BlackRock Inc., Tocqueville Asset Management, Lucas Capital Management LLC and Zweig-DiMenna International Managers Inc. were given an initial mandate to invest in commodity-company stocks that were screened to meet certain requirements. The $260 million currently managed by the four is dubbed the DSAM Kauthar Commodity Fund, named after a river in heaven described by the Quran.

The hedge-fund experiment was a departure for the region's investors, who traditionally put money into real estate, private equity or long-only mutual funds. Hedge funds were shunned due to their secretive trading strategies, which often couldn't be checked for shariah compliance. But Islamic banks around the Arabian Peninsula, which have recently started or bolstered their asset management divisions after real estate prices collapsed, are starting to show interest.
Source

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Hedge Funds Lobbying

Hedge Fund Trade Group Spent $1.1 Mil Lobbying in Q4

An important factor in how hedge funds are treated in the financial reform debate is the lobbying efforts by representatives of the hedge fund industry. The Managed Funds Association, a hedge fund trade group, spent more than $1 million in Q4 of 2009 lobbying on behalf of hedge funds. It's unclear whether these efforts will produce any real results in the regulation battle.

A trade group representing hedge funds spent nearly $1.1 million in the fourth quarter lobbying federal officials on proposed financial regulations, including a measure that would require hedge funds to register with the Securities and Exchange Commission.

The $1.08 million that the Managed Funds Association spent on lobbying in the latest quarter was about double the $520,000 it spent in the period a year earlier. The group's lobbying total for the latest quarter also tops the $910,000 it spent the previous quarter.

According to a Jan. 20 filing with the House clerk's office, the Managed Funds Association also lobbied in last year's fourth quarter on a proposal to create a Consumer Financial Protection Agency and on proposals for tighter regulation of trading financial derivatives, including credit default swaps.

Source

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Hedge Funds Pound Currency

Hedge Funds Make Gains From Fall of British Pound

Hedge funds who were able to foresee the fall in the pound's value have made sizable gains. Three of Europe's biggest hedge funds have reportedly earned "hundreds of millions" off the British currency's decline. The hedge funds that successfully bet against the pound include: BlueCrest Capital Management, Winton Capital, and the Man Group.

Three of the U.K.’s biggest hedge funds have posted huge profits on the British currency’s pain.

BlueCrest Capital Management, the Man Group and Winton Capital have earned “hundreds of millions of pounds” on the downturn of said pound Sterling, the Daily Mail reports. The pound is down to less than US$1.50, US$0.20 lower than it was over the summer.

According to Harry Adams of foreign exchange broker Schneider, currency investors are betting on further falls for the pound. He said that were Britain to lose its triple-A credit rating, the currency could fall to just US$1.20 in a “disaster for sterling,” Adams told the Mail. Source

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SEC Appaloosa Management

SEC Investigating David Tepper's Appaloosa Management

David Tepper's hedge fund, Appaloosa Management, made headlines last year for the fund's incredible performance, but now it is one of two hedge funds under investigation by the SEC. In 2009, the hedge fund firm made an incredible $7 billion profit. The regulatory probe is specifically looking into Appaloosa's trades when Wells Fargo agreed to acquire Wachovia. The other subject of the probe is the the hedge fund Carlson Capital.

Appaloosa, a $13 billion New Jersey firm run by David Tepper, has been scrutinized by the Securities and Exchange Commission over trades it made around the time Wells Fargo & Co. agreed to acquire Wachovia Corp. in 2008, according to people familiar with the matter.

Regulators also have questioned trades by Carlson, a $4.9 billion firm based in Dallas, in connection with four secondary stock offerings between late 2007 and mid-2009, according to a person familiar with the matter.

"Carlson Capital has been cooperating voluntarily and fully with the SEC relating to an inquiry in connection with 'Rule 105,' and will continue to do so," a spokesman for the firm said in an email. Appaloosa is cooperating, according to people familiar with the matter. A lawyer for Appaloosa declined to comment. A spokesman for the SEC declined to comment.
Source

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Too Big to Succeed Hedge Fund

Has Paulson's Hedge Fund Become 'Too Big to Succeed'

John Paulson's hedge fund, Paulson & Co., began 2010 managing $32 billion and investor interest has only increased. Paulson's fund has performed impressively recently, most notably in predicting the subprime mortgage meltdown. With more money flowing in from new investors, a recent article wonders whether Paulson & Co has become "too-big-to-succeed," meaning the hedge fund firm will not be able to keep up its past performance and satisfy all its investors.

John Paulson started the year overseeing $32 billion in hedge funds, third in the world behind JPMorgan Chase & Co. and Bridgewater Associates LP. Unlike many of his biggest rivals, he’s taking in new cash, raising the question of how much money is too much for a hedge-fund manager.

“There’s no doubt that Paulson is a big draw for investors at the moment,” said Richard Tomlinson, founder of London-based Tomlinson Investment Consulting, which advises clients on hedge funds. “As with all managers that bulk up, there’s always the risk of returns becoming mediocre.”

Paulson & Co., the New York-based firm that the former Bear Stearns banker and Gruss Partners trader started in 1994, differs from many large competitors because it makes concentrated bets, such as the wager against subprime mortgages that helped generate $3 billion of profit in 2007. Source

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China Financial Bubble

Hedge Fund Counsel Calls China 'Greatest Bubble in History'

The former general counsel to a hedge fund had a surprising comment on business in China. James Rickard, formerly of Long-Term Capital Management LP, said that China is in the midst of the "greatest bubble in history with the most massive misallocation of wealth."

“As I see it, it is the greatest bubble in history with the most massive misallocation of wealth,” Rickards said at the Asset Allocation Summit Asia 2010 organized by Terrapinn Pte in Hong Kong yesterday. China “is a bubble waiting to burst.”

Rickards joins hedge fund manager Jim Chanos, Gloom, Boom & Doom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of a potential crash in China’s economy. The government has raised banks’ reserve requirements twice this year after economic growth accelerated and property prices rallied.

China has pegged the yuan to the dollar since July 2008 to help exporters weather the global recession. The central bank buys dollars and sells its own currency to prevent the yuan strengthening, driving foreign-exchange reserves to a world- record $2.4 trillion as of December. Source

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Ebullio Hedge Fund

Ebullio Hedge Fund Losses

UK Commodity Ebullio Fund Loses 70% in January

The UK commodity hedge fund Ebullio has had a rough start to this year. In January, the hedge fund lost 70% falling to $1.47 million and then lost 86% in the next month. In November 2009, Ebullio Capital Management reportedly held as much as 90% of the London Metal Exchange in stocks and cash contracts.

Ebullio Capital Management's commodity hedge fund suffered its "worst month" since launch in February, slumping more than 86 percent, a report by Ebullio to investors said on Wednesday.

Assets under management fell to $1.47 million in February, and were down 69.65 percent in January, bringing total return down 95.83 percent for the year, the February report said.

Lars Steffensen, the managing partner of Ebullio, was unavailable for comment on Wednesday.

The Ebullio Commodity Fund January report had said that return on capital fell an estimated 1.10 percent for that month. Source

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Placement Agents Scrutiny

Placement Agents Struggling under Regulatory Scrutiny

The placement agent industry has struggled after damaging scandals including insider trading and pay-to-play schemes. As placement agents receive more regulatory scrutiny, they also face the problem of sinking revenue. There are fewer clients for placement agents in the wake of the financial crisis and the "expert networking" industry is struggling to survive.

Those sources said securities regulators are once again taking a look at the expert networking business, in part because the Galleon case revealed the lengths that traders can go to crack corporate secrets.

The so-called expert networking industry was first thrown for a loop in 2007 when U.S. securities regulators began looking into allegations that some hired-gun consultants had improperly divulged confidential corporate information to traders looking to score a quick profit.

But lingering regulatory concerns about the potential for abuse in the rent-an-expert business never went away, according to legal sources.

Still, the chronic suspicion is enough to make some hedge funds steer clear of the industry, even though managers know that may put them at a competitive disadvantage. Source

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Family Offices Recruitment

Family Offices Trying to Recruit Hedge Fund Professionals

Family offices are attempting to poach talent from hedge funds. The family office industry has increased efforts to recruit hedge fund professionals and it appears many will make the switch. In a survey conducted by recruitment firm Hunter Advisers, 90% of the respondents said they would consider taking a job in a family office, despite the pay cut.

U.S. family offices are set to step up their recruitment of hedge fund professionals. And those professionals are likely to be receptive, according to a new survey from Hunter Advisors.

Some 90% of the respondents to the recruiting firm’s survey said they would consider taking a job at one of the country’s 300 to 500 family offices, despite the lower pay.
“They’ll make the jump because of the stability,” Greg Coules of Hunter told Reuters. “Also, the culture and the lifestyle at these big institutions is tough.” Family offices offer “a much more genteel environment.”

The Volcker rule would bar banks from owning, sponsoring or investing in hedge funds. Source

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Alternative Directive Delayed

European Union's Alternative Funds Directive Delayed

Hedge funds may have avoided the European Union's chopping block until as late as this summer. EU finance ministers have put off their big decision on regulating the financial industry. UK politicians, especially from London, have recently voiced concerns over the Alternative Investment Funds Directive. The regulations could have important consequences on the hedge fund industry.

European Union finance ministers delayed a decision on new rules for hedge funds Tuesday in a reprieve for Britain, which fears that onerous regulations could drive the industry from London.

The Alternative Investment Fund Managers Directive would have required funds based outside the 27-member European Union to ask permission from individual European countries to market themselves to investors rather than being able to treat the bloc as a single market.

The rules also would require hedge funds, private equity groups and others to register and disclose trading information to supervisors.

Regulators and lawmakers worldwide are tightening their scrutiny of hedge funds and private equity firms on the grounds that they may have been partly to blame for the worst financial crisis in a generation. Many in Europe also see the industry as too opaque and secretive. Source

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New Jersey Pension Fund Hedge Funds

NJ Pension Fund Allocations

New Jersey Pension Fund May Allocate More to Hedge Funds

New Jersey's pension fund is considering increasing hedge fund allocations as a way of protecting the fund from losses in the stock market. The $67 billion pension fund was hit pretty hard in the recession and is looking to make up for losses during that time by investing more in hedge funds.

New Jersey’s $67 billion pension fund may increase its hedge fund investments to protect against losses in the stock market, according to a memo prepared for a meeting later this week of the State Investment Council.

The worst economic crisis since the 1930s helped push down the fund’s annual returns to 2.47 percent over the past 10 years, from a target of 8.25 percent, according to the Investment Division’s latest monthly report.

“The objective of this plan is to continue to improve the fund’s overall diversification and to allow the division to achieve its long-term return objectives during today’s low-yield environment with less reliance on traditional public equities,” Joseph wrote in the memo. The investment council will vote on the proposal at a March 18 meeting in New Brunswick, New Jersey. Source

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Institutional Investors Risk

Institutional Investors Regaining Risk Appetite in 2010

Absolute return funds are expected to receive an increase in allocations as investors' recover their appetites for risk. While some investors returned to hedge funds last year it was mostly in lower-risk fund strategies, but now institutional investors are expected to move toward equity or high-risk strategies.

Institutional investors such as pension funds, which pulled out of equity and hedge fund-like products during the financial crisis, are showing signs of a robust return as risk appetite grows.

The trend is a fillip for fund houses, but fund chiefs expect the landscape to evolve to give little room for so-called "core" products which aim for only a modest outperformance at extra cost.

"We have seen the risk appetite of investors grow steadily. The initial interest last year was devoted to things like corporate bond funds, but as we headed towards the end of last year we saw interest for equity or high-risk strategies," said Alan Brown, group chief investment officer at Schroders

"And this has continued into 2010 -- it hasn't abated at all, in fact it has accelerated," he said. Source

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Yale Alternative Investments

Yale Endowment Fund Cutting Hedge Fund Investments

Yale University is making a surprising move in its alternative asset allocations. The $16.3 billion endowment fund is increasing its private equity allocations while reducing its investments in hedge funds. While many investors are trying to place their money with hedge funds after last year's big gains, this endowment fund is investing in private equity after a dismal year for the industry.

The private research university, which has a $16.3 billion endowment fund, is decreasing its hedge fund allocation by 6% to 15%. Meanwhile, its private equity target has been raised to 26% from 21%.

The university released its portfolio rebalancing in an online report Thursday. A representative for the school declined additional comment.

The report anticipated private equity would outperform, noting alternative investing exploited market inefficiency. Private equity has earned more than 30% since the school started investing in the asset class in 1970.

Yale University investment head David Swensen has been a longtime advocate for alternative investing; championing it as superior to traditional asset management. The Ivy League school has the second richest endowment fund after Harvard University, which has $25 billion in capital. Source

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UCITS III Funds Assets

UCITS III Funds AUM

UCITS III-Compliant Funds Now Manage $52.3 Billion

UCITS III-compliant funds have recently gained in popularity after the financial crisis and they now manage $52.3 billion. The funds, which are regulator-friendly, were virtually unknown until the last few years and they now manage 3.5% of total hedge funds AUM. Although the funds have underperformed regular hedge funds, they beat fund of hedge funds over the last three years so more investors may consider giving UCITS funds a try.

UCITS III-compliant hedge funds have proliferated over the last two years. But the regulator-friendly funds have underperformed hedge funds generally, although they have done better than funds of hedge funds over the past three years.

The roughly 500 UCITS hedge funds now manage $52.3 billion, according to Eureakhedge. While that’s just 3.5% of the $1.48 trillion currently managed by hedge funds, it is up from practically nothing a few years ago.

Unsurprisingly, most UCITS assets are invested in Europe, where UCITS compliance earns a fund entrée to most jurisdictions.

Europe is home to 41% of UCITS-compliant hedge fund assets. Funds with global mandates account for another 32%. Source

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Germany Spies Hedge Funds

Germany Deploy Its Spies to Investigate Hedge Funds

Germany's finance minister made an odd announcement: his country may deploy its spies to gather intelligence on hedge funds. The use of intelligence agencies, he said, would be to protect the euro from short-selling hedge fund traders. The euro has been hurt by the debt crisis in Greece and as a result of short-selling by investment firms including hedge funds.

Germany may deploy its spies to gather information about hedge funds and other currency speculators, its finance minister said.

Wolfgang Schaeuble told the German Parliament on Tuesday that the country may direct “intelligence agencies to set up surveillance of who is getting together with whom for which kinds of speculative processes,” Bloomberg News reports.

“I find it sinister and silly,” the Centre for European Reform’s Philip Whyte told Bloomberg. “It is a complete overreaction. There is a certain school of thought in continental Europe that everything is always the fault of hedge funds.”

“Hedge funds are very nice targets because they are particularly based in London and New York,” Jacob Schmidt of hedge fund advisory Schmidt Research Partners said. “He is not going to say this about German banks.” Source

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Hedge Fund Investors Post-Crisis

Investors Reject Funds that Mistreated Them During Crisis

Hedge fund investors are like any other consumer: they like to be catered to and remember when they are treated poorly. So, it should be little surprise that while investors are returning to the hedge fund industry, they are avoiding hedge funds that they feel mistreated them in the financial crisis.

As reported yesterday, a recent survey by Deutsche Bank found that investors are flocking back to hedge funds and may contribute as much as $222 billion in 2010. However, 80% of investors said that they will avoid those funds which froze their assets, enforced long lock-up periods or created side-pockets. This should be a good lesson to managers on the costs of such methods in the long-term.

According to the survey, $100 billion to $222 billion could flow into hedge funds this year. That would push sagging hedge fund assets back to former highs at $1.72 trillion, the report says.

Not all funds will get a piece of the action, however. Investors plan to shun those that locked up their money, froze assets or added so-called sidepockets, where bad assets go to die a slow death.

According to the report, 80 percent of investors will refuse to invest in funds that participated in “freezing or suspending of assets and increasing side pockets by managers.” Freezing of assets was voted as “the most damaging action to a fund’s reputation,” according to 38 percent of the respondents – a crime worse than bad performance, which only took 20 percent of the votes.

Of course, hedge funds are also fighting the stigma by offering better terms to newcomers. Silver Point, a credit/distressed fund launched by two former Goldman Sachs partners, created side pockets for existing illiquid holdings and told new investors they get to participate in a more liquid portfolio with annual rolling liquidity. Source

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Hedge Funds Stock Market 2010

Hedge Funds Stock Market

Hedge Funds Cautious on Trading in the Stock Market

Hedge funds made great gains by trading in stocks last year, but in 2010 managers are turning more cautious. Some hedge fund managers worry that the economy could double-dip, sending stocks down to the lows the market reached in March of 2009. With the potential for the economy to falter again, hedge fund managers are looking to different strategies such as emerging markets and commodities to keep the gains from 2009.

Large bets on rising stocks helped hedge funds make gains of nearly 19 percent last year, according to Credit Suisse/Tremont, but prime brokers say funds have grown more cautious in recent weeks in areas such as U.S. and European stocks.

"Exposure has been cut back. Some (funds) have made a lot of money last year," said one prime broker, asking not to be named. "Some are sceptical about the length and breadth of the recovery," the broker said.

Banks in particular could suffer as funding costs rise and margins are squeezed, after the financial sector was a top-performer in last year's rally.

Giving up last year's gains would make it harder for them to earn lucrative performance fees and could persuade clients to pull out their cash. Read more here

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Hedge Funds 2010 Inflows Estimate

Hedge Funds Expected to Attract $222 Billion in 2010

A recent survey estimates that hedge funds may attract $222 billion in 2010, which is welcome news after two years spent struggling to bring in investors. This would be the first annual net inflow since 2007 when the financial crisis began. Investors seem much more inclined to invest with hedge funds after a year of solid returns. The projected inflows for this year would push the industry's total assets under management to $1.72 trillion.

Hedge funds globally may attract $222 billion of fresh capital this year, according to a survey by Deutsche Bank AG marking the first annual net inflow since the global financial crisis hit in 2007.

Investors are returning to hedge funds after they posted an average return of 20 percent in 2009, the most since 1999, according to HFR data. Seventy-four percent of investors in the Deutsche Bank survey expect the MSCI World Index to climb this year, while 34 percent of them predict the S&P 500 Index to gain 5 percent to 10 percent, helping hedge funds advance.

The eighth Deutsche Bank alternative investment survey, released today, polled asset managers, corporations, family offices, foundations and endowments, funds of funds, insurers, private banks, pension funds and investment consultants with more than $1.07 trillion of hedge fund assets in January. Source

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Private Equity Vs. Hedge Funds All-Star Game

Private Equity Vs. Hedge Funds Game

Private Equity Vs. Hedge Funds All-Star Game for Youth

Private equity and hedge funds share many of the same characteristics. Both are private investment vehicles, largely exclusive to accredited investors, classified as alternative assets and both industries are the target of legislation and pushes for increased regulation. While neither would like to share the spotlight cast by legislators, the two sides have come together for a good cause.

Tomorrow night, New York University will host the third annual Hedge Fund vs. Private Equity All-Star Game. The event will benefit a youth program, Youth Inc., which helps public high school teams who do not have a basketball court. Private equity has came out on top in the last two years but it should be a good game tonight.

Final rosters weren’t available at press time, but we know at least MidOcean Partners Chief Executive Ted Virtue and GenNx360 Capital Partners Managing Partner Ronald Blaylock will be defending PE’s name.

“We’ve got some aged warriors,” Virtue said, when asked who the team’s MVP will be. “(Blaylock is) our go-to-guy.”

Buyouts have a 2-0 edge in the series, although Virtue worried the streak could be in jeopardy this year. “The hedge fund guys have been recruiting some Division I basketball guys, so I’m a little nervous,” Virtue said.

The tournament, besides the PE-hedge fund match-up, includes about 20 teams made up of bankers and other finance pros, as well as students. Celebrity coaches include former New York Knicks Walt Frazier, John Starks and Charles Smith. The games tip off at 5:30 p.m. Source

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2 Minute Video Explaining The Future of The Hedge Fund Industry

Future of Hedge Funds

This very short video below talks about the future of the hedge fund industry, and answers the question, "Will hedge funds survive long term?" If you are viewing this via RSS or Email please click here to view the embedded video on our HedgeFundBlogger.com

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Tags: What is the future of the hedge fund industry, what will happen to hedge fund managers, will hedge funds survive the financial crisis?

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Geithner EU Regulations

Geithner Criticizes European Union Hedge Fund Regulations

U.S. officials have questioned the European Union's plans to regulate hedge funds. Although Britain is pushing to soften the EU proposal, U.S. Treasury Secretary Timothy Geithner still expressed his U.S. concerns in a letter stating, "We are concerned with various proposals that would discriminate against U.S. firms and deny them access to EU markets that they currently have." Here is a copy of his letter about European Union's hedge fund regulations.

The letter noted that the U.S. approach to regulation maintained full access for EU fund managers to the U.S. market.

European officials denied the proposed law is discriminatory and said it was in keeping with agreements made by the Group of 20 leading economies. "The new hedge fund rules do not discriminate against foreign players and are not protectionist," said Amadeu Altafaj, a spokesman for the commission. Marine de Carné, spokeswoman for the French delegation to the EU, said some EU governments "were quite surprised to hear that accusation of protectionism." (The U.S. letter didn't use the words "protectionist" or "protectionism.")

France has been a strong advocate for the version of the draft law that worries Mr. Geithner. It and other governments have reacted strongly to losses suffered by European investors in funds operated by Bernard Madoff, in particular.

The aim of the proposal was "to protect the investors and the people that suffered from the crisis," Ms. De Carné said. It wasn't discriminatory because once a fund manager had met the European standard, it would have a passport to the whole EU. Source

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