The European Parliament’s Economic and Monetary Affairs Committee is set to debate hedge funds and private equity regulation this month after receiving a report by Danish member of the European Parliament Poul Nyrup Rasmussen.
Rasmussen declined to comment ahead of the report’s publication but he is understood to have concerns about lightly or unregulated private pools of capital in private equity and hedge funds operating in the market alongside more tightly regulated institutions, such as pension funds, insurance companies and banks.
In particular, he is worried about private equity firms basing their funds offshore to avoid national taxes and concentrating on buyouts rather than venture capital and the impact of this leverage on portfolio companies.
The European Commission has so far ducked greater regulation but is working on rules to allow firms to passport their funds and operations into other countries.
But the parliamentary committee can force action, which could be in the form of greater transparency along similar lines to those voluntarily introduced in the UK last year following the publication of a report by Sir David Walker, the ex-chairman of Morgan Stanley International.
This looks set to cause tension between the pan-European and local private equity trade bodies over how far to regulate the industry.