Newspaper article The Evening Standard (London, England)

Get Your Gloves on, Sir David; ANTHONY HILTON

Newspaper article The Evening Standard (London, England)

Get Your Gloves on, Sir David; ANTHONY HILTON

Article excerpt


ONE of the leaders of the hedge fund industry took space in theFinancial Times last month to plead with his colleagues to cooperate with SirAndrew Large's review of the industry and how it might meet contemporarydemands for greater disclosure and accountability.

Clearly, there are some in that industry who see no need to engage with thepublic in spite of the growing political hostility to hedge funds in mainlandEurope and the United States.

Perhaps the foot-draggers among hedge funds are taking their cue from elementsof the private equity industry.

It, of course, was put through the political wringer earlier this year butdespite the passion engendered by the row there is a slug of the private equityindustry that does not see the need to change and thinks it will all blow over.

So even though Sir David Walker, at the request of the British Venture CapitalAssociation, has produced proposals for an industry code of conduct with morepublic disclosure, opponents have become notably more vociferous.

Generally speaking, Americans don't do compliance or explanations or voluntarycodes. Others take a more nuanced view but still have fairly principledobjections.

Nor is it just the American houses.

Some European firms are also well dug in. They object that they operate aworldwide business and if they give more disclosure on their UK activities andinvestments it will become impossible to resist pressure to do the same inother jurisdictions.

Others, perhaps, share the same view but find it more diplomatic to pointinstead to the practical difficulties.

They are willing to give enhanced information but they want a closer definitionof what is meant. Should they have to report on a fund-by-fund basis when manyof their UK funds have non-UK investments? Should they break out information onthe purely UK parts within the portfolio even if this might give a misleadingpicture of the performance of the fund as a whole? That is not their onlyconcern. As well as wanting a definition of the UK, they want a definition ofprivate equity.

They feel that if they are required to report, so should others who useprivate-equity techniques. They argue that if they have to report then thelikes of Sir Philip Green, the owner of Bhs, and property entrepreneur RobertTchenguiz or the Qataris bidding for Sainsbury's should also be subject to thesame disclosure rules.

They have a point because what these entrepreneurs do is oftenindistinguishable from what a private-equity firm does.

But it won't get them anywhere. The rule being adopted is that if it isregistered with the FSA as a private equity entity then it reports; if not itescapes.

The third area of contention has echoes of the first. Few private-equity housesare organised on national lines so there are genuine problems drawing theboundaries within the partnership and its investments to talk about UKperformance. …

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