HF trade groups, regulators call truce: peace breaking out on several fronts

Hedge Fund Regulation 23 Jun 2009

We were in Chicago earlier today (Tuesday) at the Managed Funds Association’s Forum 2009.  “MFA” used to stand for “Managed Futures Association”.  So as you’d expect from a Chicago-based meeting of this group, there were plenty of CTAs and global macro managers discussing trend following and pork bellies.

But not far beneath the surface of nearly every session was the 800 pound gorilla in the room: the ongoing saga of hedge fund regulation around the world (see our category by that name at right, or our research dossier containing over 60 critical documents on the topic).

The days when hedge funds and regulators squared off in a perennial grudge match seem to be long gone.  Phil Goldstein, the colourful and tenacious advocate of hedge funds, who challenged and beat back the SEC’s 2006 attempt at regulation, has been replaced by the more sanguine approach taken by the MFA’s Richard Baker and AIMA’s Andrew Baker (no relation – but bizarre coincidence nonetheless we note).

Both groups, along with a smattering of others in Washington DC, have stepped up their educational efforts on Capitol Hill this year.  The Wall Street Journal reported on Monday that,

“The lobbying push marks a shift for the $1 trillion hedge-fund industry. In the past, hedge funds usually stayed off the radar screen, often reacting after congressional or regulatory proposals were made. Now they are playing offense, meeting with lawmakers and regulators in hopes of convincing them that hedge funds are important cogs in the financial markets and weren’t responsible for the continuing financial crisis.”

The New York Times was less generous in its assessment of these efforts, reporting on Monday that,

“After a tumultuous run for many of these funds, this normally secretive corner of Wall Street is mobilizing its money and power to fend off tougher oversight, higher taxes and much greater transparency.

Now, no one has ever accused the Times of being pro-hedge fund.  But the truth is that neither the MFA nor AIMA seems to be trying to “fend off tougher oversight…” at all…

Although AIMA came down harshly on the EC’s recent regulation proposals, it announced today that it is much more supportive of the US Treasury’s recent regulatory reform proposals.  Said AIMA Chairman Todd Groome in a press release earlier today:

“We welcome the broad-based principles on regulatory reform produced by the Administration, and we believe that the proposals relating to hedge funds are closely aligned with our own policies announced in February.”

Meanwhile, the MFA’s President Emeritus and Special Counsel, International Affairs, John Gaine is equally pleased with proposals put forth yesterday by the International Organisation of Securities Commissions (IOSCO).  Said Gaines in an MFA press release yesterday:

“MFA appreciates The IOSCO Technical Committee report, which contains six high level principles that will enable securities regulators to address the regulatory and systemic risks both in their own jurisdictions and in a collective way that will support a global, harmonized approach to oversight of hedge fund advisers.”

For the record, AIMA is also a fan of the IOSCO proposals.  In yet another press release this week, AIMA’s Baker said:

“We are very happy to welcome the publication of this report today because AIMA has already announced its support for several of the high level principles mentioned in it.”

So it’s only Tuesday night here in the US and already, we’ve had a flurry of press releases and media sessions that seem to suggest a lull in the fighting.

Let’s just hope the following comment from the MFA’s Gaines isn’t an ominous sign of things to come…

“We look forward to reviewing the full text of the report…”

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