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The Independent – Grimly aware that a European Commission crackdown on regulation of hedge funds and private equity spells disaster for the EU’s predominantly London-based industry, Treasury ministers have been desperately lobbying their counterparts in Brussels for months, but their pleas have fallen on deaf ears.
Now, however, the Americans have woken up to the fact that many of their hedge funds would find it impossible to do business in the EU under proposals for regulatory reform. In recent weeks, US Treasury officials have thus been touring the EU, letting their displeasure be known.
It appears that the Americans’ involvement is already paying dividends. Sweden, which holds the EU presidency, was quietly letting it be known yesterday that it will ensure some sort of compromise is brokered. The Alternative Investment Management Association, which represents the sector’s interests, now thinks disaster may be averted.
Marketwatch – David Einhorn, head of hedge-fund firm Greenlight Capital, called AAA credit ratings a curse and said he is betting against rating agency Moody’s, during a speech at a closely watched investment conference on Wednesday.
Einhorn said that many institutions with AAA ratings, including the U.S. government, turned that supposed benefit into a disaster by borrowing recklessly, according to a hedge-fund investor who attended the conference in New York and spoke on condition of anonymity.
The leading purveyor of AAA ratings is Moody’s (MCO), so Greenlight Capital is short that company’s shares, the investor quoted Einhorn as saying.
Insurance Journal – Demand for disaster derivatives is surging as insurers seek alternatives to scarce reinsurance and expensive catastrophe bonds, with the forthcoming North Atlantic hurricane season likely to give a further boost.
Prices are at record levels for Industry Loss Warranties (ILWs) and derivatives such as catastrophe futures, used by insurers to cover their potential losses from natural disasters.
"People are trying to purchase as much cover as they can, be they insurance companies in Florida or reinsurers in Bermuda, and obviously pricing has been driven up considerably," said Stephen Breen, Executive Vice President at Tradition Re, which brokers traditional reinsurance and catastrophe derivatives.
BBC – In much of continental Europe, there’s a widespread belief that hedge funds and private equity firms caused the global economic crisis.
Which is presumably one reason why the European Commission wants much tighter regulation of both the hedgies and the buyout boys.
I’ve had personal experience of this, in a recent interview for French telly on how to prevent a repetition of the disaster: more-or-less all my interlocutor wanted to discuss was the alleged imperative of constraining the activities of hedge funds; there wasn’t even a nod at the reality that far more of the real culprits were in the banks, including French banks.
Forbes – Private equity investors in Asia are increasingly fearful of fraud within their portfolio companies as the global economic downturn puts mounting pressure on firms in the region.
The global financial crisis has already caused significant damage to private equity-backed companies in Asia, with shares plunging and demand drying up for everything from electronics to manufactured goods.
But corporate fraud, a scourge that can be more prevalent and harder to detect in emerging economies such as China and India, can quickly turn a bad private equity investment into a disaster.
