EU new hedge fund regime warns vultures

The European Parliament has given definitive approval for new rules to regulate managers of hedge funds and private equity groups handling massive sums. The directive to come into force in 2013 won overwhelming backing in the assembly.

It imposes strict registration, reporting and capital requirements on high risk alternative investment funds. Under centralized EU supervision, client assets get better safeguards too. The law also takes aim against asset-stripping.

MEP Robert Goebbels, who guided the text through the Parliament, said: “Investors who take control of a company and try to skin it, break it up… We’ve raised barriers against those so-called vulture funds.”

Under the rules, Europe-wide “passports” will allow funds to market their products across the bloc if they behave responsibly. It means managers will not have to seek permission from each member state’s authority.

It is about time, the pro-regulators say. The speculative funds represented some 2,000 billion dollars before the 2008 American subprime crisis began. The rules set out to prevent collapses in future such as that of Lehman Brothers in the US.

While some 80 percent of the EU’s hedge fund sector is located in London, accounting for hard lobbying against the restrictions, the package the Parliament passed was welcomed as less threatening than earlier proposals.

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