Private funds fight EU restrictions

Private equity industry and hedge fund sector set to walk a communications tightrope.

The hedge fund and private equity industries were this week lobbying against restrictive EU regulation at the same time as recognising the need to increase transparency and open communication.

The European Commission this week published a draft directive to regulate the hedge fund and private equity industries, following fierce debate between politicians and industry bodies on the recommendations.

Both industries have conducted long-term public and private lobbying of key EU regulators to soften the proposed laws.

The British Venture Capital Association (BVCA), which represents the British private equity industry, has conducted numerous high-level meetings with EU regulators and co-authored a letter with other European bodies outlining their 'concerns' that the draft proposals might put the industry at 'a significant global disadvantage'.

But one issue that is making concise communication more problematic is bundling of private equity and hedge funds under one directive.

'Although both industries are "alternatives" there is not much else they have in common,' said Tim Hames, head of comms and public affairs at the BVCA. 'Most people would find it odd that very small private equity firms overseeing small portfolio companies were being treated the same as larger, masters of the universe-type institutions.'

Private equity came under heavy fire for its perceived comms deficiencies in 2007 and industry practitioners believe it has forged ahead of hedge funds in this regard.

Paul Downes, chief executive of Merlin, said: 'The hedge fund industry in Europe has caught up with best practice comms over the past couple of years, but private equity was a decade ahead and is still out in front in terms of representing the industry on a collective basis.'

The Alternative Investment Management Association has been lobbying on behalf of the hedge fund industry, but observers fell short of describing the lobbying efforts of the two industries as unified. Private equity is believed to be keen to distance itself from hedge funds.

Nonetheless, both industries are aware of the need to continue attempts to banish their secretive reputations.

Roddi Vaughan-Thomas, partner at Peregrine Communications, said: 'All financial services brands have to go through a period of justifying themselves again. They need to decide what they stand for.'


The hedge fund industry finds itself caught in a storm and we are at the stage when politicians are baying for blood. The European hedge fund industry is UK dominated so French and German politicians feel they can put the boot in with impunity. Hedge funds make a great scapegoat, but the case for regulation in any meaningful form is pretty marginal.

The hedge fund industry has not made a great effort to explain to mainstream journalists what it actually does. Private equity has been good at dispelling negative media coverage in recent years, but hedge funds still have a lot of work to do.

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