Schroeder To Push For International Hedge Fund Controls

by Ulrika Lomas, for LawAndTax-News.com, Brussels

15 June 2005

German Chancellor Helmut Schroeder said on Monday that foreign investors remain extremely welcome in Germany, but that the government would try to have hedge funds included in a new EU-wide directive on investment funds.

Schroeder said he would push for the definition and establishment of a unified set of minimum international standards for hedge funds at the G8 meeting in Scotland on July 6-7.

Responding to the recent furore over the role of hedge funds in expelling the top management of Deutsche Boerse, whcih saw his possible successor Franz Muentefering call foreign investors 'locusts', Schroeder also suggested that additional regulations could be introduced in Germany to oblige investors to disclose more information about their shareholdings in a company.

In fact, Germany, along with France and other EU member states, has opened up the market for retail hedge funds in recent years, leading the UK's investment fund sector to worry that it is in danger of getting left behind. Managers want the FSA to relax its rules on retail hedge funds in particular.

The FSA is due to launch an eagerly awaited consultation paper on retail hedge funds this month; but at the same time it is also preparing a further document on how hedge fund regulation can be improved and tightened, after an investigation into the workings of hedge funds, examining trading practices such as short selling

Two-thirds of Europe's 900 hedge funds are based in London, and a recent report by International Financial Services London calculated that the city controls one-fifth of global hedge fund assets.

Merrill Lynch recently said it was expecting to receive approval for a new hedge fund product which will be marketed to middle-income investors for a minimum investment of £10,000 or £250 per month, and will be distributed through Nationwide Building Society branches and internet-based fund supermarkets. UK Absolute Alpha Fund, described as a "hedge fund in a unit trust," is expected to be approved by regulator the Financial Services Authority within the next few days.

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