Hedge funds under FSA scrutiny |
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Wed, 09 Nov 2005 20:05
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LONDON: At least twenty-five of London’s top hedge fund institutions are being “relationship managed” (the official word for regulatory scrutiny) by the Financial Services Authority, the regulator said.
The FSA said these institutions and their fund managers would be under constant watch. These fund houses are warned of a possible “pincer movement” from British and US regulators, if their trading methods undermined investor protection.
Although the watchdog refused to name the funds, the most influential ones – funds that have the potential to disrupt the markets – would be closely watched. According to an undisclosed source, GLG Partners, one of London’s top hedge funds, is among those being investigated.
At a meeting of the Commons Treasury Select Committee, the FSA chairman Sir Callum McCarthy said that certain aspects needed to be examined, especially in derivatives trading, such as the slowness in contract disclosures and delays in trade confirmations. He explained to the MPs some of the complex trading methods employed by hedge funds.
He also said that the Federal Reserve Bank of New York was collaborating with the FSA in this effort. London is the operational base for at least 200 of the world’s largest hedge fund managers, who collectively control an estimated £574bn in assets worldwide. This group alone accounts for nearly half of London stock market’s daily turnover.
The initiative to monitor hedge funds was proposed in June after regulators expressed concerns that they could be responsible for market volatility and posed a risk to investors.
Issues being discussed at the meeting included a proposal to deregulate the Self-Invested Personal Pension Plan (SIPP). The MPs sought confirmation for the proposal which would mean UK residents will be able to invest in property, works of art, race horses and fine wines as part of their retirement nest egg. The new Sipp policy comes into effect from April 2006.
The chairman reassured MPs that Sipps would be unregulated for a year but at the same time the new market would also be closely watched.
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