Reuters reports British pension funds are joining the battle against European Union’s proposed regulations on the hedge fund and alternative investment universe. The National Association of Pension Funds (NAPF) and a director at Hermes, manager of the largest corporate scheme in Britain, said the rules could restrict investment choices and returns, further affecting the ability of pension funds to provide ample returns to support the aging population.
The current draft of legislation would require hedge funds to register and disclose leverage levels, according to Reuters. Furthermore, non-EU managers would be restricted in sales of funds in Europe. The Alternative Investment Management Association (AIMA) estimates could create a 25 billion euro hit for European pension funds and as much as 2.5% decrease in returns. We are seeing attempts at regulating the hedge fund industry across the globe with proposed legislation by the US Treasury. Hedge funds have successfully lobbied to keep these types of regulations from affecting the industry in the past, but mounting pressure from legislators and their constituents is on the rise due to failures of funds and fraudulent fund managers in recent years.
Investors would benefit from registration of funds requiring leverage ratios and returns to be disclosed along with risk statistics. As failures and fraudulent managers gain media attention, look for proposed regulations to gain traction with legislatures.