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German BVI sees no need to regulate hedge funds

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GERMANY - Fund industry association BVI has urged the government not to tighten regulation of hedge funds active in Germany, arguing that current rules are sufficient.

The call follows last week’s ousting of Werner Seifert as chief executive of Deutsche Börse and Rolf Breuer as the exchange’s chairman. The overthrow was engineered by the hedge funds TCI and Atticus, which have sizeable stakes in the exchange group.

Shortly after his May 9 departure, Breuer called for further restrictions on hedge funds, charging that their short-term attitude was a threat to corporate Germany. German finance minister Hans Eichel also recently suggested that short-term investment strategies such as those employed by hedge funds should be outlawed.

But in an interview with Börsen Zeitung, BVI managing director Stefan Seip defended the role of hedge funds in the Deutsche Börse affair. “All I’ve seen so far is that several funds exercised their rights as shareholders, and there is nothing unusual about that. Where is more regulation needed?” said Seip.

Seip also noted that under current German law, hedge funds were obliged to be as transparent as other stakeholders when they invested in companies.

“Whenever their ownership of a company exceeds 5, 10, 25, 50 or 75%, hedge funds have to disclose this fact. As a result, I don’t see any need for further regulation,” he told the newspaper.

Despite Eichel’s remarks, it is not clear whether the government plans to tighten the regulation of hedge funds. In fact, the German finance ministry has made it known that it would lobby for more regulation on the European level.

Since the beginning of 2004, when Germany’s hedge fund industry was born, the financial services regulator BaFin has been overseeing the products. Their approval by BaFin is, among other criteria, dependent on the regulator fully understanding the investment strategy and risk management.

Meanwhile, institutional fund venture Union PanAgora has launched one of the first single hedge funds to be domiciled in Germany.

The fund, driven by a long-short investment strategy, will be offered to institutional investors via private placements.

Thomas Kieselstein, head of equities at Union PanAgora, will manage the product, which seeks to exploit differences in valuations among European equities via the long-short approach.

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