Lord Myners, the City minister, has dismissed fears that the Government is caving in to EU regulators over harsh new rules which could penalise London's thriving hedge-fund industry.
Top hedge-fund traders have criticised the Government's handling of the proposals, threatening to leave London if they go through. But Lord Myners, who described the legislation, as "fundamentally flawed and bad for London" said their anxieties were unfounded. Mark Hoban, the shadow Treasury Secretary, has also accused the Treasury of "caving in", claiming that it has not done enough to get the legislation amended. "It's of vital importance for London to get this right."
But Lord Myners said that he and other Treasury officials, with the support of the hedge-fund industry, are working flat-out to persuade Brussels to amend the Alternative Investment Fund Managers Draft Directive. "The industry shouldn't worry. I am not going to let it go the same way as our coal communities. But all the headlines about hedge-fund managers threatening to leave London don't help our case."
Meetings with hedge-fund representatives are taking place all the time, he said, adding that many of the proposals would strengthen the industry. "It's not all bad," he said.
Backing up his claim that the Government is lobbying the EU hard, Lord Myners said he is going to Stockholm at the end of this month to meet the Swedish Minister of Finance, Anders Borg, to put London's case.
Sweden takes over the EU presidency in July and is thought to be far more sympathetic towards the UK's objections than many in the EU, particularly the French and Germans. Lord Myners has already met with Mats Odell, Sweden's Minister for Financial Markets.
Brussels is pushing for tougher regulation of hedge funds with laws to mandate the amount of leverage they are permitted, which is particularly damaging since most trading strategies depend on leverage. It also wants to restrict hedge-fund managers' partners, such as prime brokers, to the same tax jurisdiction which will stop many investors coming to London as most of them are registered off-shore.
According to the Alternative Investment Managers Association, the trade group for more than 1,000 hedge funds globally, the worst of the new rules is one preventing non-European institutions from making investments in European funds. A spokeman said this could have dangerous consequences. "This is protectionist, breaking the World Trade Organisation's rules and may even breach Brussels' own rules of subsidiarity."Reuse content