EU To Implement Hedge Fund Cap

The EU Commission is considering a rule that would force hedge funds to reveal their five biggest creditors if assets under management included loans at least equal to the fund's own capital
By None

The EU Commission is considering a rule that would force hedge funds to reveal their five biggest creditors if assets under management included loans at least equal to the fund’s own capital, according to the Financial Times Deutscheland.

A new body attached to the European Central Bank would regulate data from the fund. The proposal is to be announced on April 21 by the European Commissioner Charlie McCreevy.

The ruling will only concern funds with more than EUR250 million (USD340 million), and will affect those focusing on equities, commodities and real-estate.

Funds will also need to hold a minimum level of capital of EUR125,000 (USD169,200) plus 0.02% of a managers’ level of assets above EUR250 million.

European analysts have met the proposal with skepticism. Barclays Capital economist Thorsten Polleit said: ” I think this is a very bad indication for gross unemployment in the coming years There is a law of unintended consequences and whenever a government tries to solve an issue it usually ends up not solving the issue but creating even more problems.”

UniCredit’s chief European economist Aurelio Maccario said: “In Europe there has been too much focus on what I call collateral damage from the crisis, rather than the real sources of the crisis.”

Maccario continued by saying that the EU focus should be on commercial banks, and that investment funds had not required massive government rescue plans.

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