McCreevy doesn’t want to regulate hedge funds

Ann Cahill, Europe Correspondent

The former Irish Finance Minister launched a discussion paper in Brussels yesterday on revising the law on the E5 trillion investment funds market.

The paper also invites comment on whether there is a need for measures on hedge funds on a cross-border basis.

Mr McCreevy emphasised he does not believe in regulating this market as it is and hopes not to have to during his five-year tenure.

The latest statistics show that up to 50% of recent transactions come from hedge funds, making this an enormous part of the capital market.

“I do not want to and I do not believe there is support for some kind of initiative that will over-regulate them and put them out of existence. I am not going down that road,” he said.

It was not needed to support the development of the industry cross-border, and there was no clear evidence of cross-border retail investor risk.

He said he believed the best regulator was a financially educated consumer and he would like member states to address this issue, but it was solely a matter for them.

He said it was not possible for legislation to cover all possibilities and by the time regulations were put in place, the market had generally moved on.

But the commission said that, over the next few months, it wil assemble industry experts to examine hedge fund risks as well as ways to remove barriers to them doing business across borders.

The increasing assets in hedge funds have drawn warnings from politicians such as German Chancellor Gerhard Schroeder and from global regulators and central bankers.

The US Securities and Exchange Commission is requiring hedge fund managers to register as investment advisers to tighten scrutiny.

Mr McCreevy said he disagreed with statements from the German Chancellor and his political party about a need to rein in funds activities.

He said his Green Paper was an effort to do some repair work rather than be a fundamental overhaul. It invites comment on a range of proposals aimed at boosting the efficiency of the single market for investment funds.