The European Union’s draft proposal to tighten hedge fund oversight is likely to focus exclusively on the largest hedge fund and private equity managers.
Under proposed rules drafted by the European Commission, only “alternative investment fund managers” with at least €250 million (US$333 million) in assets under management would be covered by extensive new disclosure rules, Bloomberg News reports. The draft has not been finalized, but it is already attracting opposition for its failure to target funds as well as managers, as well as its exclusion of smaller firms, which would leave some 85% of hedge fund and private equity managers excluded from the new rules.
An explanatory memorandum explained the draft sought to focus on “where risks are concentrated,” arguing that smaller managers “are unlikely to give rise to important systemic risks or be a threat to orderly markets.”
Those firms that might pose systemic risks—which manage some 76% of all hedge fund assets in the 27-member EU—would be forced to provide a raft of new information to regulators. Under the draft, largest firms would have to report on risks, debts and trading activities, Bloomberg reports.
The EC is set to officially issue its proposals this month.