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Debate over whether hedge fund industry bodies should consolidate

Date: Thursday, July 28, 2011
Author: Charles Gubert, COO Connect

Debate is raging as to whether industry bodies representing the interests of hedge funds and other asset managers should consolidate to present a more unified front in the face of creeping regulation.

One chief operating officer (COO) at a multi-billion dollar London-based hedge fund highlighted the industry needed to become more engaged with legislators in both Brussels and the US and focus on effective lobbying and education, as well as continuing to respond to consultation papers.

“Some of the industry bodies out there should merge to provide better representation in their lobbying efforts. They could also pool their resources together and increase their presence, particularly in Brussels,” added the COO.

“Industry associations such as the Alternative Investment Management Association (AIMA), the Investment Management Association (IMA) and the Managed Funds Association (MFA) should unite,” stressed the COO. The COO added there were multiple industry bodies operating in identical jurisdictions lobbying for similar causes– a situation that could be a hindrance to their overall effectiveness.

The Alternative Investment Fund Managers Directive (AIFMD), the Markets in Financial Instruments Directive II (MiFID II) and short selling proposals are just some of the rules emanating from the EU, which are going to put significant strain and pressure on hedge funds’ resources. Meanwhile, the US Dodd Frank Act is also going to have a major impact on the industry when – or if - it is fully implemented. Organisations such AIMA, the IMA and the MFA have been at the forefront of the asset management sector’s lobbying efforts.

However, consolidation was rejected by a source close to one industry body. “Consolidation between industry bodies is something that has been discussed but the practical considerations are an issue. For example, the membership of these organisations is different and I think it would be difficult to make a merger work. I do not think it is a realistic suggestion given the diversity of our memberships,” said the source.

The source added cooperation between industry bodies was already solid and collectively they had all made strides in improving regulation aimed at hedge funds in the US and EU.