Sunday, 7 February 2016
Last updated 1 day ago
Oct 15 2008 | 3:04pm ET
The main U.S. hedge fund industry group has tough words for U.K. regulators in a transatlantic lobbying effort.
The Managed Funds Association is warning the Bank of England that the Lehman Brothers bankruptcy proceedings in London, which have some $65 billion of hedge fund prime brokerage assets frozen, imperils the British prime brokerage industry as a whole. And with prime brokerage providing a big portion of British banking profits, the MFA cautions that the Lehman bankruptcy could undermine the planned bailout of British banks.
“Prime brokerage clients are already withdrawing their assets from the U.K. prime brokers/U.K. branches of overseas prime brokers,” MFA chief Richard Baker wrote, noting that hedge funds have transferred billions of prime brokerage assets to the U.S., where it is believed that the legal system provides greater protection. “This development is calling into question the future of the U.K. prime brokerage market.”
The MFA is urging the BoE to work with the U.K. Financial Services Authority and Treasury to expedite the Lehman proceedings. But the Bank said it has “no powers” to do so, and Lehman administrator PricewaterhouseCoopers says there is nothing that can speed the freeing of those assets.
Baker’s effort is backed by the Alternative Investment Management Association, the main British hedge fund lobby.