Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Guardian.co.uk – No single hedge fund today poses a systemic risk to the global financial system, said a former partner at Long Term Capital Management (LTCM), as lawmakers continue to hammer out rules to control the industry.
Even though many funds are now much larger than LTCM, which collapsed in 1998 and received a $3.5 billion bailout to avert widespread financial chaos, Hans Hufschmid, currently chief executive at fund servicing firm GlobeOp, said prime brokers now act as an effective brake on hedge fund risk. "I find it hard to believe — I don’t think a hedge fund today is big enough to pose a systemic risk," he said.
Guardian Unlimited – The U.S. Securities and Exchange Commission needs authority to require hedge fund advisers to register with the agency plus the power to examine funds’ books, the agency’s chairman said on Tuesday.
U.S. lawmakers are working to give the SEC the power to require hedge fund managers to register with the agency after a federal court overturned the SEC’s previous effort to oversee the $1.3 trillion industry.
Speaking at the Reuters Global Financial Regulation Summit in Washington, SEC Chairman Mary Schapiro said registration without any further authority "would not be sufficient."
Reuters – President Barack Obama will weigh in on Thursday on the lending practices of U.S. credit card companies, an issue that has triggered an outcry from consumers hit with high fees and interest rates.
Obama has joined a push by lawmakers to rein in credit card practices that his aides have labeled as "abusive" and plans to air some of his concerns at a White House meeting with 13 executives from top banks and companies that issue the cards.
Bloomberg – Hedge fund managers who run the largest 15 percent of portfolios in the European Union would have to report risks, debts and trading activities to regulators under a draft proposal to tighten oversight after the financial crisis.
The EU’s executive agency in Brussels is weighing plans to regulate “alternative investment fund managers” who oversee at least 250 million euros ($333 million). The measure also covers private-equity buyout firms.
The proposal answers calls from EU lawmakers for rules on all market actors, and from the Group of 20 nations for oversight of hedge funds large enough to put financial systems at risk. While the proposal, which may still be changed, excludes 85 percent of hedge fund managers, it would leave out 24 percent of their assets in the region, according to the commission.
Associated Press – President Barack Obama is trying to dampen a fire he once stoked, urging a more tempered response to public furor over bonuses paid to executives of the publicly rescued insurance giant American International Group.
Obama is virtually certain to use Tuesday’s prime-time news conference to continue an effort that began over the weekend: cooling the anti-AIG ferocity, now that it threatens to undermine his efforts to bail out the nation’s deeply troubled financial sector.
Obama’s tone changed dramatically after the House voted last week for targeted taxes to take back most of the $165 million in bonuses paid to AIG executives. Many lawmakers felt Obama had encouraged their step, because he called the bonuses reckless, outrageous and unjustified.
In the White House, however, the situation seemed to be spinning out of control. Some fellow Democrats questioned the constitutionality and wisdom of the House’s action. Executives of other troubled companies signaled they would not make deals with a federal government that revises agreements after they are signed.
On Sunday, Obama told CBS’ "60 Minutes" the House’s plan to slap a special tax on the AIG executives would be unconstitutional. Borrowing a line from his Feb. 24 speech to Congress, he said he would not "govern out of anger."
Bloomberg – Britain’s Prince Charles, among other royalty and wealthy Europeans, were targeted through Bernard Madoff’s use of high-profile recruiters, said whistleblower Harry Markopolos in documents given U.S. lawmakers.
Prince Michael of Yugoslavia was an executive of a so- called Madoff feeder fund, Access International Advisors Ltd., when he met Prince Charles and his sons at a polo field during a marketing tour in 2002, Markopolos said. Prince Charles put no money with Madoff, said a person familiar with the matter. Liliane Bettencourt, the world’s wealthiest woman, did lose money after she entrusted part of her $22.9 billion fortune to Access, two people familiar with the matter said.
Evening Standard – Veterans of the secretive $1.5 trillion (£1 trillion) industry say the $50 billion Madoff fraud could bring about sweeping changes in the way the authorities monitor activity.
"This is an Enron moment for hedge funds," said Peter Rup, chief investment officer at New York hedge fund Orion Capital Management. "Regulation would be welcome, primarily from a trust standpoint."
Enron, once the world’s largest energy-trading firm, collapsed in 2001 amid allegations of accounting fraud. Less than a year later, US lawmakers passed the Sarbanes-Oxley Act, which set tighter corporate accountability rules for publicly traded companies.
Suggestions for rule changes for hedge funds include strengthening whistleblower programmes and imposing capital requirements similar to those for mutual funds. Rup and others argue this would restore confidence in the market.
