London- and Geneva-based investment management consultancy Laven Partners has questioned the premises of French President Nicolas Sarkozy’s speech on Tuesday at the United Nations in which
London- and Geneva-based investment management consultancy Laven Partners has questioned the premises of French President Nicolas Sarkozy’s speech on Tuesday at the United Nations in which he accused hedge funds of responsibility for the global financial turmoil.
Sarkozy told delegates at the UN General Assembly that the global financial system was in need of an overhaul, and should be more regulated and less opaque. He called for punishment for those responsible for the current crisis, noting that the problem began with hedge funds.
Laven Partners managing director Jérôme de Lavenère Lussan says the firm disagrees with Sarkozy’s belief in the need for more regulation. There is a need for an overhaul, he says – not to bring in new regulation but to bring change to regulators who do not understand and cannot implement existing regulations within the European Union.
‘The idea that hedge funds are not regulated is out of date and reflects poorly on the French president’s advisers,’ Lussan says. ‘There is regulation and a lot of it comes from the EU, but there is a lack of application and understanding of the international nature of financial investments which makes it harder for regulation to bite.’
He argues that that politicians are not sufficiently informed about the regulatory requirements applicable to hedge funds and are therefore likely to target the wrong players with the wrong laws.
‘This is an opportune time to remember that banks and prime brokers control the markets, not hedge funds, and that banks are supposed to be regulated, as was Société Générale,’ Lussan says, referring to the French bank’s losses of more than EUR5bn stemming from transactions attributed to a ‘rogue trader’.
‘We hope that the EU, led by the currently French presidency, can act quickly to help protect and regulate the market. However, we should pick the right actors and the right script, otherwise we risk losing the well recognised benefits of alternative fund managers. There is no single type of hedge fund and bonuses alone do not indicate those responsible. Let’s hope Sarkozy’s advisers know that.’
The French president could also ask his half-brother, Olivier Sarkozy, who is a managing director at private equity giant Carlyle Group and co-head of the firm’s global financial services group, having previously been joint global head of investment banking for the financial institutions group at UBS.
