Industry Updates

Kinetic Partners welcomes UK FSA's hedge fund survey, maintains industry does not present systemic risk

Thursday, February 25, 2010

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Opalesque Industry Updtae - The survey contains a series of notable insights and will be of increasing value over the coming years as it is repeated on a six monthly basis.

Crucially, the FSA’s Hedge Fund Survey and Hedge Fund as a Counterparty Survey demonstrates that hedge funds do not pose a potentially destabilising credit counterparty risk across the surveyed banks and that there is a relatively low level of ‘leverage’ under the FSA’s various measures across the 50 hedge funds surveyed.

This demonstrates that hedge funds are generally not exposed to any more risk than a fund managed by the traditional sector. Kinetic Partners believes that it is totally inappropriate for members of the EU to single out hedge funds as being responsible for the recent financial crisis.

The Spanish EU Council presidency’s recent interventions on the Draft AIFM Directive further demonstrates the complete lack of understanding of hedge funds by a majority of onshore EU member states.

Andrew Shrimpton, a member at Kinetic Partners commented: “By showing how widely fund leverage figures can differ, depending on the measurement approach used, the above mentioned surveys demonstrate how simplistic and unworkable it will be for the European Commission to impose hard caps on fund leverage under the Alternative Investment Fund Managers’ Directive.”

In summary, the continuing oversight of the FSA through these surveys at six monthly intervals will identify whether hedge fund managers pose a systemic risk either individually or collectively.

Julian Korek, a founding member at Kinetic Partners added: “It has always been Kinetic Partners’ belief that the hedge fund industry does not present a systemic risk in the manner in which it had been feared. It is also clear that the many and varying risks that asset managers are exposed to are not unique to any one type of investment.”

Kinetic Partners is a global professional services firm providing forensic, corporate recovery, regulatory risk and compliance, tax and audit and assurance services to the asset management industry. Launched in 2005 as a viable alternative to the ‘Big Four’, Kinetic Partners has grown rapidly, and now has almost 100 professional staff in London, Dublin, Grand Cayman, New York and Geneva. Kinetic Partners services over 850 clients, and has attained its reputation as the leading provider of services to hedge funds worldwide; as recognition, the Firm has recently been named ‘Best regulatory advisory firm’ by HFMWeek, a leading global news source for the alternative investment industry. www.kinetic-partners.com

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