Regulatory Issues category

A volatile year so far….

June 11, 2020

An article by Beverly Chandler.

Beverly Chandler will be covering GAIM International 2010, 14 - 17 June in Monaco

This year so far has brought a huge variety of drama for the world, not just for the hedge fund industry.  But our focus here is on our industry and recently it has had to deal with debt, volcanic ash, government change, regulatory and tax challenges and unprecedented wild weather.

Despite everything thrown at it, hedge funds appear to be not just surviving but actually getting back to business and thriving.  Recent research showed in-flows to global hedge funds in February at US$ 16.6 bn and March saw US$ 7.6 bn.  Assets in the industry are now at the highest level for 16 months at US$ 1.64 trillion.

Just as that volcanic ash is beginning to settle, so has the dust of the credit crisis begun to settle as people get back to work, albeit with a new awareness of how scarily close to wrecking it all the economic world came.  And with that realisation has come a raft of regulatory and supervisory proposals, designed to stop a banking and financial crisis on that scale happening again.

The European authorities are just about to announce the outcome of a lengthy process which started with what many felt was a knee-jerk reaction to the financial crisis.  The justification of new legislation aimed at curbing the activities of hedge funds and private equity funds was to mitigate systemic risk but as the Alternative Investment Management Association (AIMA) repeatedly claims, there is little evidence that hedge funds caused the crisis.

While proposals were Europe-wide, the greatest concentration of European hedge fund activity is clearly in England and so it was the British hedge fund community that felt increasingly targeted by an almost vindictive regulatory campaign.

The next wave of attack came in proposed tax changes, coming at the hedge fund industry from all sides, the IMF, the EU and within the UK, from the pre-election success Conservatives. Concerned that banks might re-invent themselves as hedge funds in order to avoid paying proposed new taxes on their profits above a certain level, the IMF proposals included hedge funds and alternative funds in new levies that could add an additional 20 per cent tax on the pre-tax profits of certain banks and other financial businesses.

And who would be most affected by any of these changes?  The investors, who according to a new report in the US, are quite likely to be investors in public pension funds.  The report finds that public pension funds by dollar value, are the largest of the institutional allocators of capital to hedge funds.

Attracted to hedge funds by their uncorrelated returns, institutional investors did take fright at the lack of liquidity in hedge fund and fund of funds during the financial crisis.  And that need for liquidity has certainly been a driver for another trend we have seen over this year so far, the growth of so-called hedge fund-lite products in Europe, which show that UCITS funds (European ‘passported’ funds) have taken in US$ 200 bn since they were first allowed to include hedge funds.

Critics of the hedge fund industry - and there are a few, although not many may be reading this -  just have to remember that over 2008 the S&P 500 recorded a 37 per cent fall while hedge funds, on average achieved losses of 19 per cent.  Hedge funds experienced loss but less of a loss than traditional long only investments and while that still happens, they will always prove popular with investors.

About Beverly Chandler

Beverly Chandler has been a specialist hedge fund writer for a number of years, writing for most of the trade press, a number of national newspapers and publishing a couple of books on the subject.  She will be covering the GAIM International 2010 conference, producing a daily digest of the key outtakes from the event, and interviewing speakers & delegates about prevailing industry trends, their views of the future and why GAIM International is the “must attend” conference in the annual calendar.

Broadening access to the benefits of Hedge Funds

June 8, 2020

An Interview with Peter Clarke, chief executive, Man Group plc

Peter Clarke, Man Group plc will be speaking at GAIM International 2010, 14 - 17 June in Monaco.

For Peter Clarke his GAIM International 2010 panel session will focus on many of the themes which echo other industry commentators.  “I will talk about how people are looking at return streams from hedge fund strategies in the context of how to manage the risk associated with their wider portfolios” he says.

Clarke feels that investors are thinking carefully about how they access hedge fund exposures.  “They are asking what format can I use and who do I rely on for generating that return stream and what sort of characteristics do I want from that?”

This trend goes hand in hand with a broadening of access to the benefits of hedge funds.  “It’s not just portfolio allocation but also, increasingly, the question of a wider audience looking to access return streams from hedge fund strategies - they are not just the purview of institutions or the very wealthy.”

Clarke also feels that there is greater concern about regulation and safety in investment.  Here, he feels that the UCITS vehicle has helped put investors at ease.  “The UCITS structure offers a mechanism for a wider investor base here in Europe” says Clarke. Read more »



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