EU hedge fund debate is getting an injection of commonsense

Fortunately, some wiser voices are being heard in this debate.

As expected the Swedish presidency of the EU is taking a rather more measured and co-ordinated approach to the complex issues arising out of the global financial crisis. The pre-G20 summit meeting of EU leaders is part of that more thoughtful approach. The Swedes have realised that crudely attacking London will damage the whole EU and that the AIFMD as it currently stands would effectively prevent any EU citizen, pension fund or investor getting access to a very wide range of offshore funds (and offshore is where they would go under these proposals). Consequently, last week the Swedes told members states that they would prepare a modified version of the directive for discussion at the EU meeting on 22 September, prior to the G20 summit two days later in Pittsburgh.

A similarly conciliatory view is being taken by the new chair of the important European Parliament Economic and Monetary Affairs Committee, Sharon Bowles, a UK Liberal Democrat. She criticised EU regulators for their "impatience and need to be seen to be doing something", adding that many of the issues that have caused problems in the past are already being addressed by national regulators such as the UK Financial Services Authority.

This does not mean that hedge fund managers can sit back and think nothing will change. There will be new rules, and it is unclear still whether these will be dictated by national regulators, Europe or through the sort of co-ordinated global action that is likely to emerge from the G20 summit. They are likely to be quite tough rules too. However, they will not now be framed in such a way as to "punish" London and New York.