G-20 Agree On New Hedge Fund Oversight

Date: Friday, April 3, 2009
Author: FINalternatives

The leaders of the world’s leading economies agreed on the broad outlines of a new regulatory framework, one that includes stricter limits on some—but not all—hedge funds.

The Group of 20, meeting in London, issued a joint statement that promises greater cooperation to combat the sources of the current economic crisis and more than $1 trillion in stimulus money to get the economy back on track. But there was no agreement on an international regulator; each country will implement the new regulations on alternative investments, executive pay, credit-rating agencies and bank risks.

The G-20 statement calls for greater oversight for “systematically important” hedge funds. That is something of a victory for the industry: French President Nicolas Sarkozy and German Chancellor Angela Merkel had pledged to push hard for strict oversight of all hedge funds, not just “systematically important” ones.

But any new oversight, in this case by a new Financial Stability Forum composed of G-20 members and the European Commission, is too much for some in the industry.

“Our industry has turned out to be a scapegoat for other issues,” Andrew Baker of the Alternative Investment Management Association, told Bloomberg News.

In a statement, Baker went further, calling the hedge fund industry’s role in the financial crisis “marginal.”

“Although we agree that any entity that provides banking services should be regulated as a bank, the vast majority of hedge funds do not fall into this category.”