Sunday, 27 July 2014
Last updated 2 days ago
May 24 2007 | 1:41pm ET
German Chancellor Angela Merkel told lawmakers today that hedge fund transparency would be one of seven topics discussed at the G8 summit in early June, but that a deal “can’t be expected any time soon.”
Addressing the Bundestag, the lower house of the German parliament, Merkel said, “Until now, there has not been enough transparency in hedge funds.” But she is the latest German leader to downplay chances for a deal at the summit, set for June 6-8 in the resort town of Heiligendamm. The United States, Britain and Japan have all come out against imposing a voluntary code of conduct on the hedge fund industry, which has been a major goal of Germany’s G8 presidency.
But the Germans aren’t the only ones concerned about the transparency in the alternative investments industry. A group of former Securities and Exchange Commission chairmen called for regulators to rein in hedge funds at a Washington panel yesterday.
Hosted by their most recent successor and incumbent, Christopher Cox, the panel included five ex-chairmen, and several did not hesitate to let loose on alternatives.
“I continue to be concerned about the influence of pooled vehicles in the marketplace,” said William Donaldson, whose attempt to force hedge fund to register with the SEC was famously tossed by a federal court. “I see it as a ticking time bomb that is going to blow up at some point.”
David Ruder, who headed the commission in the late 1980s, complained that even if regulators wanted to do something, they don’t know enough about alternatives.
“The regulators don’t have the information about the unregulated entities,” he said. “There’s a big hole here that needs to be addressed.”
But the onus, most agreed, falls on the industry itself. Harvey Pitt, chairmen from 2001 to 2003, continued to warn hedge funds and private equity firms against pursuing retail investors. “They’re becoming an investment vehicle for the masses,” he said, warning that such moves will only attract regulatory scrutiny.
All agreed, however, that there will be more Amaranth Advisors-type collapses in the future. Ruder invoked Long-Term Capital Management, and Arthur Levitt, head of the commission during Bill Clinton’s presidency, said hedge fund problems are “as inevitable as we’re sitting here.”
Levitt, who now works at private equity giant The Carlyle Group, lamented that Pitt’s and Donaldson’s efforts to improve hedge fund and leveraged buy-out transparency failed. With “the next blow-up,” he said sternly, “the industry will absolutely regret that they didn’t take your deal.”
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…