Regulating investment funds

The European Parliament is expected to formally approve the new Alternative Investment Fund Managers Directive, on hedge funds and private equity funds in November 2010. This article provides a short history of the lobbying war waged by the investment fund lobby and shows how hedge funds and private equity funds and their lobby groups managed to fight and win what has been the first really open political battle on financial regulation in the history of the European Union.

In Summary:

- A long standing battle on regulation of "alternative investment funds", hedge funds and private equity funds, draws to a close this month (November 2010) with MEPs voting on the Alternative Investment Fund Managers Directive. While early in the process ambitious proposals were tabled, the legislation to be adopted is weak and full of holes.

- This is in no small part due to the concerted efforts of the funds themselves and their lobby organisations EVCA and AIMA.

- Thanks to its close relationship with the Single Market Commissioner, the financial industry has been able to hold back legislation for years.

- When a proposal was finally tabled, the financial lobby managed to influence both the European Parliament and the Council of Ministers so effectively that the lobbyists are now drawing a sigh of relief.

- Close cooperation with the British government and their ability to stir up protectionist fears in the US were instrumental to their victory.

- Given that this was the first really open battle on financial regulation - fought out in public and through intense political discussions in Parliament and the Council - the final result bodes ill for future efforts to rein in the power of financial corporations in general, and the financial lobby in particular.

Hedge fund and private equity lobby groups EVCA and AIMA are candidates for this year's Worst EU Lobbying Award - vote now at www.worstlobby.eu

Read the full report here: