MEP urges caution on hedge funds and private equity

The chair of parliament’s influential economic and monetary affairs committee says the crisis on global financial markets has forever changed the way hedge funds will be perceived.

French Socialist MEP Pervenche Berès told a parliamentary hearing on Tuesday that the recent turbulence in the financial world had highlighted the need to adopt a “cautious and firm” approach in future to both hedge funds and private equity.

Her comments come after it was reported this week that hedge funds, which often promise to deliver positive returns in all markets, posted losses in the first quarter of the year as tumbling stock markets and fears about sluggish growth took a toll.

Many industry analysts said the first quarter would be the worst ever for hedge funds but investors have noted that the funds are still delivering on promises to do better than the broader stock market.

The parliamentary hearing, which included representatives of hedge funds, investment companies and financial regulators, also heard from Peter Rossman of the international union of food, farm and hotel workers.

He said, “The recent crisis underscores the need for regulation in order to ensure we are never again pushed into such a perilous economic situation.”

Danish Socialist MEP Poul Nyrup Rasmussen, who is drafting an own-initiative report for parliament on hedge funds and spoke at the hearing, told this website, “During the debate, I did not hear any arguments against the need for more transparency and disclosure when it comes to hedge funds and private equity.

“The case for this is very strong and that, for me, is probably the main message to emerge from this hearing,” added the former Danish prime minister.

He added, “I was in the US last week and it was astonishing to see the consensus on the need for a regulatory framework to avoid such turbulence on the financial markets in the future.”

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