26/2/2010
By Sophie Baker
A hedge fund survey published by the Financial Services Authority (FSA) in the UK which concludes that the industry does not pose a systemic risk, and features relatively low levels of leverage, has been welcomed by the Alternative Investment Management Association (AIMA).
The UK is home to 80 per cent of Europe's hedge fund industry, and the FSA found that major hedge funds 'did not pose a potentially destabilising credit counterparty risk', with 'relatively low' levels of leverage. The report concluded that analysis revealed 'no clear evidence to suggest that any individual fund posed a significant systemic risk to the financial system'.
"These striking conclusions from the lead regulator for the industry in Europe are of clear relevance to the on-going debate about the Alternative Investment Fund Managers Directive in Europe," commented Andrew Baker, chief executive officer of AIMA. "If the industry does not pose a systemic risk and features relatively low levels of leverage then additional regulation should not be disproportionate and punitive."
AIMA now hopes that European Union policymakers will heed the message the FSA has sent out. "The FSA rigorously regulates hedge fund managers with its authorisation and on-going supervision regime. Their conclusions are timely and extremely valuable in the current debate."
Baker said AIMA had noted the International Organisation of Securities Commissions (IOSCO) comment with their released systemic risk data template for hedge funds, which stated that while 'the legislative process is ongoing in many jurisdictions', regulators can 'help to inform the relevant legislative debates'. "Regulators who have developed experience and expertise of the hedge fund sector over many years are well placed to inform these debates.
"These conclusions from the FSA echo similar remarks by Jacques de Larosière and the European Central Bank, among others, who have questioned aspects of the draft Directive. AIMA has embraced the principle of transparency by the industry to the authorities and has engaged with policymakers to secure effective and proportionate regulation in this field," Baker concluded.
Meanwhile, the FSA's new Funds of Alternative Investment Funds (FAIFs) rules have been welcomed by the Investment Management Association (IMA), a regime which comes into effect from 6 March 2010.
The new rules provide a feeder fund for corporate investors to gain access to the new tax efficient authorised property fund (PAIFs) regime.
"The introduction of FAIFs is good news for product invocation and investor choice because it enables investors to gain access to a wider range of investments," explained Julie Patterson, director of authorised funds and tax at the IMA. "We also welcome the production by the FSA of a factsheet on FAIFs for intermediaries.
"The new regime will enhance the UK's position as a domicile for a wider range of funds. Today's publication is the culmination of much hard work by the authorities and the Investment Management Association."
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