The Alternative Investment Management Association says that while some details and definitions contained in the US Dodd-Frank Bill remain to be clarified, it supports those parts of the bill relating to the registration of hedge fund managers.
It also supports the periodic reporting by managers to supervisors in the interests of improving their ability to assess financial stability
“This is not because any individual hedge fund is likely to be deemed systemically important, or because the sector in any way increases financial stability risk; it does not,” says Todd Groome, chairman of Aima.
“In fact, the diversity of our industry’s activities serves to reduce pro-cyclicality in financial markets, and thereby supports financial stability. Through a more informed supervisory relationship, we expect supervisors and other public authorities to obtain a better understanding of our industry, as we contribute to their efforts to identify market stresses and vulnerabilities.”
Aima also welcomes the continued involvement and limited sponsorship of hedge fund activities by traditional financial institutions, pursuant to the revised “Volcker Rule.”
It supports the financial stability benefits of central clearing for OTC derivatives, and is calling on authorities to ensure broad and fair access by non-banks to central clearing counterparties.
“Policymakers should seek a coordinated and consistent regulatory framework, and in doing so avoid unnecessary costs related to multiple registrations and inconsistent reporting regimes, as well as possibly duplicative capital and margin requirements related to swap and derivative activities,” says Groome.
Aima is concerned with parts of the Dodd-Frank Bill, saying it would tax larger US hedge fund managers to finance the estimated costs of this legislation, despite the fact that no hedge fund received public funds or caused any financial stress to a banking institution or other counterparty during the crisis.
“The inclusion of hedge funds in this financial tax suggests that our industry has been singled out for more onerous treatment. If this tax is targeted at perceived wrongdoers or those who caused the crisis, hedge funds had nothing to do with the cause of the crisis, and there has been no finding before, during or since the crisis that hedge funds cause increased risk to financial stability. On the other hand, if the tax is meant to finance the public goal of improved financial stability, then all market participants should be made to contribute, not just hedge funds and banks. There is no reason to single out our industry in this manner,” adds Groome.
