28/04/2010 Author: Tony Griffiths

Three UK parties confirm support for hedge funds

The UK’s three main political parties have reiterated their broad support for the country’s hedge fund industry in interviews with HFMWeek, prior to next week’s general election, with the Conservatives confirming their commitment to reforming the UK’s method of financial regulation.   

Mark Hoban, shadow financial sectary for the Conservative party, said: “While hedge funds are only a small part of the financial services sector, their growing importance does mean that we need to keep the regulation of the sector under review to ensure that it reflects the risks they pose.”

Conservative plans to return primary regulatory oversight to the Bank of England (BoE) would see the Financial Services Authority (FSA) disbanded as part of the replacement of, what Hoban calls, a “failed tripartite system”. Under the Tories, larger hedge funds would be monitored by the BoE – a method of regulation that the existing FSA is already adopting.

Vince Cable, Treasury representative for the Liberal Democrats, told HFMWeek that a Lib Dem Government would “work with the FSA to ensure that hedge fund regulation is proportionate and places no unnecessary burdens on the industry”.

“The Liberal Democrats recognise the importance of the UK financial sector to the UK economy and will always put the stability of the UK economy as a whole at the forefront of economic policy,” said Cable. “Within this, a Liberal Democrat government recognises the benefits to the UK of a successful hedge fund industry and their role within a balanced portfolio for many investors such as pension funds.”

Paul Myners, the financial services secretary, said that Labour would ensure the “maintenance” of the current framework. “The UK is a pre-eminent centre for fund management and we have every intention of ensuring that it remains competitive,” he added.

All three ministers were also keen to highlight the importance of staying on top of developments in Europe. The Alternative Investment Fund Managers (AIFM) Directive continues to divide opinion and Myners was keen to stress the work done by the current Government.

“We have worked hard with our partners in Europe to secure significant improvements,” he said. “The text has now moved a long way from the European Commission’s original proposal. There are still a number of areas where we are fighting to secure further improvements.”

Hoban accused the Labour Government of being “far too slow” in spotting the threat posed by the Directive. “We are now in the closing stages of the debate on the Directive and a Conservative Government would have to make the best of the position that the Labour Government leaves us,” he said. “We have already started to have discussions in Brussels about what could be done.”

Cable, however, warned that a Conservative Government would be more likely to find itself on the outside and therefore ineffectual in persuading other countries to side with them. “The Conservatives’ withdrawal from the European People’s Party grouping has had a devastating effect on relations, as has been well-publicised by [Angela] Merkel and [Nicolas] Sarkozy, so the UK has lost potential allies for a Conservative Government.”

He added: “A Liberal Democrat government would build on the work already done, continue to press for a workable solution, and mobilise support from allies within other governments.”

The Directive was discussed at last week’s meeting of G20 finance ministers, held one month after the document’s controversial third-countries provisions prompted concerns from US Treasury chief Timothy Geithner.

Commenting on the meet, Todd Groome, chairman of the Alternative investment Management Association (Aima), the prominent AIFM lobbyist, said the trade body was “pleased to see the G20 finance officials call again for a ‘consistent and co-ordinated’ approach to the oversight of hedge funds”.