EU Hedge Fund Compromise
Possible Compromise on European Union Hedge Fund Rules
According to the Wall Street Journal, hedge funds and private equity firms are beginning to accept that the European Union will pass at least some form of the directive on alternative fund managers. This gives some room for compromise in the final negotiations and hedge funds are probably already pleased that the more strict proposals have been removed from the bill like imposing a strict fixed limit on leverage. Furthermore, private equity firms are expected to escape with less regulation than hedge funds and venture capital firms with less than 50 employees are exempt from the laws. These areas show that there is room for negotiations and many hope that hedge funds can water down the legislation in the final days before the directive goest to vote.
But many of the alternative-asset-management industry's biggest concerns have been watered down. The directive will give regulators new oversight of funds' leverage and capital ratios, but will no longer impose fixed limits.
Meanwhile, the French and German finance ministers haven't ruled out a compromise over new rules that would block funds domiciled outside the EU from marketing to European investors unless their home markets have equivalent regulatory oversight, a move that has raised concerns over protectionism, including from U.S. Treasury Secretary Timothy Geithner. The finance ministers have said that, so long as funds are adequately monitoring systemic risk, their access will remain unchanged. Private-placement systems might be allowed to continue, at least until a concept of regulatory equivalence has been agreed to. The European Parliament's draft even offers the carrot of a pan-EU "passport," provided funds agree to comply with the new rules and their home regulator agrees to enforce them. source
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