Rules for hedge funds

Hedge funds are heavyweights in European finance, managing assets worth almost half a trillion euro, yet they are barely regulated, their debt levels are often excessive, the salaries of fund managers can exceed those of bank CEOs many times over, and many of them are located in tax havens.

After the crisis triggered by the collapse of Lehman Brothers, the European Commission proposed a Directive on non-UCITS funds, i.e. hedge funds, private equity, real-estate funds, commodity funds, infrastructure funds and other types of institutional fund not covered by the Directive on Undertakings for Collective Investment in Transferable Securities.

The proposal foresees a licence for hedge fund managers marketing their products in the EU.

The Greens believe hedge funds can pose a major threat to Europe's financial stability and economy.

Consequently, we think they should be supervised and regulated, just like financial institutions.

Their debt leverage should be limited, their transparency increased, and their managers' pay capped.

Since most funds operate across borders, we are adamant that the competent European supervisor should be able to control them.

The Greens succeeded in ensuring that fund managers are paid according to the same rules as banks' top employees.

We also support the idea that funds licensed to operate in Europe should be covered by the legislation applying rules on automatic exchanges of information between tax authorities, to hinder money laundering and tax evasion.

The Greens were unable to muster majority support for several crucial points.

While the outcome of negotiations in Parliament was very constructive, the report was subsequently weakened, mostly in negotiations with the Council.

The main loophole is that only 'actively' marketed funds are actually subject to the Directive. So they can still take on as much debt as they wan