Germany To Limit Hedge Funds To 'Professionals'

Jul 25 2012 | 11:09am ET

Germany has never been shy about its dislike of hedge funds; the country has consistently pressed for their strict regulation and former Vice Chancellor Franz Müntefering famously referred to them as "swarms of locusts." So it is no surprise that the country has introduced tough a new law to bring hedge funds to heel within its borders.

The new bill, introduced today by Finance Minister Wolfgang Schäuble, would bar all but professional investors from directly investing in hedge funds. All others would have to settle for funds of hedge funds—and even those would have to carry a warning from the finance minister that "this investment fund invests in hedge funds, which are not subject to any legal limitations on leverage or risk."

"The stated aim of this law is to provide protection to private investors against especially risky investments," Johannes Blankenheim, a spokesman for Germany's Finance Ministry, said.

Germany's cabinet is expected to take up the measure after the summer. In addition to the tough new limits on who can invest, the law will also bring Germany into line with the European Union's new rules on alternative investments, which come into force next year.

Unsurprisingly, the German hedge fund industry isn't happy. Frank Dornseifer of the Bundersverband Alternative Investments called Schäuble's proposals "contradictory," the Berliner Zeitung reports.


In Depth

Electronifie: Better Bond Trading

May 11 2016 | 3:03pm ET

Technology has revolutionized countless aspects of investing and trading, but the...

Lifestyle

From Modern Trader: Stephen Curry is a Black Swan

May 18 2016 | 7:43pm ET

What do the rise of the Internet, the sinking of the Titanic, 9/11, and Stephen...

Guest Contributor

LendingClub and the Question of Internal Hedge Funds

May 19 2016 | 8:42pm ET

Peer-to-peer lending platform LendingClub Corp. has been in the news since the firm...