Local view for "http://purl.org/linkedpolitics/eu/plenary/2004-01-15-Speech-4-034"
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"en.20040115.2.4-034"2
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".
Madam President, I would like to thank the Commissioner for his considered views and I hope, even if he defers to his expert panels, that he will take into account the fact that this area most probably deserves legislation in the future. I shall run through the main reasons for our view of this.
The first hedge fund was established back in 1949 and, as of now, assets under management globally are estimated at some EUR 600 billion. Of these, about 15%, or EUR 90 billion, are managed from Europe. Even if European investment managers manage them, most of them are still domiciled in offshore tax and regulatory havens. There has been a huge increase in interest in this type of investment in recent years, especially in the United States, where affluent and moderately affluent investors have discovered them. Many institutional investors now find it acceptable to invest in this way.
This interest has now spread to Europe, especially as many of these funds, because of their willingness to sell short and leverage their results, have performed well in absolute terms over the last three years of negative stock market performance. The media has picked up on this, and such performances are featured in the personal finance sections of the newspapers. As a result there is some concern that less and less sophisticated investors will be tempted to entrust their savings to risky offshore hedge funds by one means or another. Even if most of these are perfectly respectable, well-administered and managed, there is only very basic regulatory control. EU regulators are concerned about the risks that may be run, while the investment industry is attracted by the commercial opportunities of tapping into this trend. We consider that it is an opportune time to introduce an appropriately light-handed regime in the European Union that will attract those funds to set up within European jurisdictions. This view is further strengthened by the initiatives of certain Member States, which have introduced or are considering introducing such facilitating regimes at the national level. Ireland, Germany and Luxembourg are three such examples.
Another matter of concern in the context of our attempts to produce a single European capital and investment market, is that some Member States impose fiscal or regulatory conditions which discriminate against investment into such funds in other Member States. We therefore propose that a distinct light-handed regime be established which can accommodate the characteristics of hedge funds – and also, incidentally, other alternative investment vehicles which currently lack a suitable legal home at an EU level. We are looking for an arrangement which can provide these vehicles with an EU passport on the basis of mutual recognition. These funds invest in areas such as property, currencies and commodities. Clearly these investments are not appropriate for everyone, at least until their awareness of the risks they carry are fully understood and appreciated. For this reason, we stress the absolute necessity of education, of clear and straightforward information and of strict regulatory control of those who sell and distribute such products. There is no reason to deny European citizens access to these interesting investment opportunities, but we feel their interests will be better safeguarded if these are available within EU jurisdictions and are subject to appropriate regulation. They will also provide opportunities for our European investment professionals to enhance their skills and build high-value businesses and jobs. Capital will also be attracted to our businesses and industries here in Europe, rather than in America and other parts of the world.
A separate section of my report is devoted to derivatives. These are widely used in both mainstream business and industry and in the investment world. While they are often vilified as high-risk speculative instruments, in fact, they can just as readily be applied – and are – in order to limit and reduce risk. We have identified two main issues – Mr Bolkestein identified three – which deserve attention. Systemic risks to the world's financial system could possibly occur because we have little or no way of quantifying the full extent of exposure. This applies especially to specialised derivatives which are dealt over the counter and tend to be less liquid than more conventional derivatives. This also applies to credit derivatives, whose use has exploded, as banks offload – for capital adequacy reasons – their assets onto non-banks including, incidentally, hedge funds.
We therefore call on the Commission, and the various international institutions, to develop appropriate means to measure, monitor and control such outstandings."@en1
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