Hedge Funds Review – US hedge fund managers could be subject to higher personal taxes if changes to the taxation rules included in President Barack Obama’s 2010 budget proposal are adopted.

The budget proposal includes measures to treat carried interest as ordinary income as opposed to capital gains for tax purposes. That would raise taxes on income earned from performance and incentive fees from the current rate of 15% applicable to capital gains to over 39%.

Carried interest has been a sensitive topic in Washington for many years. Some politicians have argued that hedge funds and private equity groups have used the carried interest exemption to avoid paying their fair share of taxes.

The proposed change in tax rules could have a deep impact on the earnings of hedge fund managers. The compensation structure at many hedge fund companies puts the onus on performance and incentive fees as the principal source of income for the manager.

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Reuters – The Hedge Fund Standards Board, the body set up to develop voluntary standards in the industry, said on Wednesday it now represents about half of hedge fund assets in Europe.

The announcement comes as hedge funds attempt to head off tougher regulation in the wake of turmoil in the global financial system.

The industry has come under intense scrutiny, most notably for the impact of short-selling employed by many managers. In September, regulators in the U.S. and Europe imposed a temporary ban on shorting financial stocks.

Ten new signatories to the HFSB include Blackrock Investment Management UK, New Star Asset Management and Sabre Fund Management. They join 14 existing members including Man Group Plc, the world’s largest hedge fund manager, GLG Partners and Marshall Wace.

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