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DNB announces new hedge fund directive

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NETHERLANDS -De Nederlandsche Bank will implement a new directive for the risk management of investments in private equity and hedge funds, central bank president Nout Wellink has announced.

In a speech for the Economic Factorial Association in Groningen yesterday, Wellink also called for a consultation with pension funds, banks and insurers to establish such a measure.

He urged financial institutions such as pension funds to keep sight of the risks of investing in private equity and hedge funds - which is not always easy due to the lack of transparency in the asset class and a shortage in experienced investment managers.

Hedge funds and private equity have not gained the best of reputations in the Netherlands recently, with finance minister Joop Wijn likening them to "locusts".

Nonetheless, Wellink argued in his speech that the asset class should be seen as an enrichment of the financial scheme.

Still, he said: "Some investors have much more expertise than others, with the danger that the risks accumulate at institutions which are not prepared for it."

With the new directive the DNB wants to stimulate these institutions to enhance their risk management with regards to their expertise in the asset classes.

The regulator is now working on guiding principles for "untransparent investments" for which it will consult the financial sector, Wellink said.

A spokesperson for the regulator said that the DNB would implement the directive in the course of next year.




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