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AIMA : Europe’s hedge fund industry does not pose systemic risk

Friday, February 26, 2010
Opalesque Industry Update: (Feb-25) The Alternative Investment Management Association (AIMA) – the global hedge fund industry association – has welcomed the hedge fund survey published by the UK’s Financial Services Authority which concluded that the industry does not pose a systemic risk and features relatively low levels of leverage.

Andrew Baker, Chief Executive Officer of AIMA, said: “As the UK is home to 80% of Europe’s hedge fund industry, these conclusions from the FSA are also true for the European hedge fund industry as a whole. These striking conclusions from the lead regulator for the industry in Europe are of clear relevance to the on-going debate about the Alternative Investment Fund Managers Directive in Europe. If the industry does not pose a systemic risk and features relatively low levels of leverage then additional regulation should not be disproportionate and punitive.”

The FSA survey found that major hedge funds “did not pose a potentially destabilising credit counterparty risk” and that the levels of leverage employed were “relatively low” which “suggests a contained level of risk”. The report concluded that its analysis “revealed no clear evidence to suggest that any individual fund posed a significant systemic risk to the financial system”.

Andrew Baker added: “We hope that policymakers in the European Union will heed this message from the lead regulator in Europe for the hedge fund industry. The FSA rigorously regulates hedge fund managers with its authorisation and on-going supervision regime. Their conclusions are timely and extremely valuable in the current debate.

“We note that the International Organization of Securities Commissions (IOSCO) commented when they released their systemic risk data template for hedge funds that while ‘the legislative process is ongoing in many jurisdictions’, regulators can ‘help to inform the relevant legislative debates’. Regulators who have developed experience and expertise of the hedge fund sector over many years are well placed to inform these debates.

“These conclusions from the FSA echo similar remarks by Jacques de Larosière and the European Central Bank, among others, who have questioned aspects of the draft Directive. AIMA has embraced the principle of transparency by the industry to the authorities and has engaged with policymakers to secure effective and proportionate regulation in this field.”

As the only truly representative global hedge fund association, AIMA, the Alternative Investment Management Association, has more than 1,100 corporate members (with over 4,500 individual contacts) worldwide, based in over 40 countries.


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