Hedge fund lobby groups outline Brexit wishlist
By Lindsay Fortado Having stayed silent during the referendum on the UK leaving the EU, hedge fundlobby groups are laying out what they would like the government to negotiate to protect the industry in the UK, with access to EU investors and workers topping the list.
Hedge funds stand to lose the passporting rights granted by the Alternative Investment Fund Managers Directive, which allows them to sell funds to investors across the EU.
Losing the ability to hire EU workers would also hit the industry — it is estimated that 20 per cent of its employees in London come from the EU.
The Alternative Investment Management Association, Managed Funds Association and the Alternative Credit Council will publish a document this week that calls for those rights to be maintained, as long as this does not affect the UK’s ability to set its own rules governing the industry, according to a draft seen by the Financial Times.
Assuming that the UK is unlikely to remain in the single market, the groups argue that the government should try to maximise access to investors in the EU with new agreements on financial services that would allow reciprocal access.
At the same time, the UK should try to align its rules and regulations more closely with the US and Asia, they say.
AIMA is seeking more influence in Westminster, and Labour MP Chris Evans is forming an all-party parliamentary group on hedge funds.
While the wealthy members of the industry may be out of favour in many parts of Britain, the groups argue that they provide more than 40,000 jobs across the UK and contribute nearly £4bn a year in tax.
“Post-2008, the industry’s role has further increased in significance; our members are the guardians of people’s pensions and savings and many alternative investment funds are now lending directly to businesses and financing social housing and other essential projects,” AIMA chief executive Jack Inglis said.
The government should introduce a series of tax-efficient funds and securitisation vehicles that would allow them to pool capital from investors globally, and to “further develop the UK as an international capital market and encourage domestic equity and debt investment”, he said.
According to AIMA, about 85 per cent of European hedge fund assets are managed from the UK, and investment from Europe accounts for about a quarter of the money managed by UK firms.
If the UK did not negotiate an equivalent agreement, losing the AIFMD passport would mean funds having to apply to each country for access, unless the EU granted the UK permission under regulatory “equivalence”, a move it has yet to make with any country.
In order to still qualify for AIFMD, hedge funds could open offices in the EU.
AIMA opted against taking a position before Brexit and hedge fund managers were split. Former Man Group chief executive Manny Roman, Winton Capital founder David Harding, and Caxton Associates chief executive Andrew Law all openly supported remaining in the EU, while Crispin Odey, Marshall Wace chairman Paul Marshall and CQS founder Sir Michael Hintze backed the Leave campaign.