London’s financial watchdog is increasing the number of hedge fund managers under supervision to monitor the growing influence of activist funds.
The Financial Services Authority said it was widening the number of hedge fund managers under supervision after reviewing the risk posed by activist funds to the markets. The FSA has monitored “high impact” managers at London’s 25 biggest hedge funds for the past 12 months after publishing a paper detailing their growing influence on markets. The latest move comes after the FSA hired a former hedge fund executive to its six-man “relationship management” team.
The FSA meets London’s largest hedge funds at least twice a year to understand the risk they pose to its stability objectives. An FSA spokesman would not discuss how many or which managers it oversees. But market observers suggested the number was likely to have grown by half a dozen.
The 31 largest London-based hedge funds each manage more than $1bn in assets and in total control about 50pc of Europe’s $325bn hedge fund industry. Several hundred other hedge funds, which control the remaining 50pc of assets under management, are overseen by the FSA’s wholesale division.
Activist or “event-driven” hedge funds, such as Polygon, Laxey Partners and Mellon HBV Alternative Strategies, are becoming an increasingly influential part of European markets as they take stakes to challenge everything from management to financing. Chicago-based Hedge Fund Research says the strategy was the third-fastest growing in the sector in the second quarter, attracting almost $5bn in net investment.