On 26 February 2009, the European Commission published a speech by Charlie McCreevy (European Commissioner for Internal Market and Services) at the EC conference on private equity and hedge funds.
Commissioner McCreevy began his speech by discussing the role of hedge funds and private equity in the financial crisis. He stated that he did not believe that they were central to the crisis and that this has been reiterated in the report published by the de Larosière group. However, in line with that report Commissioner McCreevy stated that there were reasons for taking another look at hedge fund and private equity regulation.
When considering regulatory or legislative initiatives in respect of hedge funds and private equity Commissioner McCreevy stated that any action should:
- Make the necessary distinctions between hedge funds, private equity and other forms of alternative investment. Any policy intervention needs to be clear about which problems it is trying to solve.
- Build on the extensive regulatory experience of European alternative investment managers. What is needed is a clearer view of how authorities should supervise alternative investment managers.
- Recognise that the first line of defence against undesirable levels of leverage in hedge funds, or excessive lending to private equity managed companies is to limit the flow of credit at source.
- Recognise that many of the criticisms and accusations levelled at hedge funds and private equity are not unique to them.
- Recognise the highly trans-national character of the hedge fund and private equity industries. Action taken should ideally be supported by international consensus to the greatest extent possible.
On investor protection Commissioner McCreevy stated that it was important to remember that hedge funds and private equity raise the bulk of their money from experienced or institutional investors. Such investors must receive such information as is needed to perform effective due diligence on the fund's liquidity and risk management, valuation process as well as on the basic investment proposition.
View Commissioner McCreevy speech at EC Conference on private equity and hedge funds, 26 February 2009