The City Minister Lord Myners attacked European Union proposals to impose stringent regulations on hedge funds, arguing that the plans were politically motivated and needed "major surgery" before becoming law. Speaking to the Alternative Investment Management Association (Aima), the body that represents the interests of the hedge fund industry, Lord Myners warned that, "imposing ill-considered rules in haste would be counterproductive, whether at European or national level." Aima has previously criticised the government for not taking a stronger line against the proposed directive.
The speech will be welcomed by London's hedge funds, which have been lobbying government to act to water down the EU draft law. The proposals are seen as reaction to public ire at the risks taken by hedge funds and their role in the fuelling last year’s financial crisis.
In particular, the industry is concerned that leverage levels on funds will be capped and that they will have to disclose more about their investing strategies.
The industry in Europe has gravitated towards London in recent years, attracted by the perceived lack of regulation imposed by the UK government. In a thinly veiled attack on President Sarkozy of France, who has called for tougher controls, the minister said that 80 per cent of funds are managed in Europe were controlled from London, making the industry an important contributor to the UK economy: "only three per cent are managed from France... It is perhaps easy for other European countries to make political capital out of demanding intrusive regulation of an industry of which they have little or no direct experience."
In what could lead to rows with other European governments, Lord Myners said the "draft directive is flawed" and that he would be working with sympathetic governments, especially the Swedish administration that has also expressed doubts about the proposed directive, "to make significant changes" to the proposals before they become law.
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