France Pushes for Hedge Fund Regulation
Financial Times reporters Ben Hall and James Mackintosh report that France is calling for stricter regulation on hedge funds. Possible changes include: (a) higher capital requirements imposed on banks that lend to hedge funds and otherwise provide services as prime brokers (b) more transparency and (c) mandatory registration of hedge funds with regulators "in the country where they are sold." (See "France to call for hedge fund crackdown," February 12, 2009.)
France's finance minister, Christine LaGarde, has been calling for additional hedge fund rules for months, urging other countries to band together in this effort. Just a few months ago, LaGarde told Daily Telegraph readers that "the health of hedge funds had long been her prime concern. She cited the adverse impact of leverage for many alternative fund managers, some of whom were forced to sell assets quickly in order to stay afloat. See "Hedge Funds could be next to be hit, says French finance minister Christine Lagarde" by Henry Samuel and Harry Wallop (October 17,2008).
With heightened public scrutiny, the inevitable increased costs of regulation can't be welcome news to industry participants. Investors will have to weigh the perceived benefits of new rules against the potential economic impact on performance. Picking sides may not be possible for too much longer.
C'est la guerre!
