Hedge funds act to water down EU plans for industry regulation

The hedge fund industry is readying to launch a series of initiatives aimed at watering down European Union proposals to regulate the sector, the U.K. trade body said this week. Hedge funds have reacted strongly to a draft E.U. directive published at the end of April in particular that it would require all fund managers, rather than just the funds themselves, to register and obtain government authorization.

"We will call for urgent effort to be devoted to redrafting this directive, and we will seek to have excluded those provisions which are the most damaging," said Andrew Baker, chief executive of the Alternative Investment Management Association, or AIMA.

AIMA, whose members manage more than 75% of hedge fund industry assets globally, said that it supported many of the E.U. proposals, including the need for transparency but that the directive in its present form was punitive and unworkable.

It also wants to prevent opponents of the directive who say it is too weak from prevailing. Most recently France said it wanted stronger regulation for the whole financial system but singled out hedge funds as being in special need of tougher policing.

Speaking at a panel in New York a few weeks ago the French Finance Minister Christine Lagarde said she's "not happy" with the directive which she said doesn't go far enough.