UK - Tighter US controls on hedge funds are set to bolster security for UK pension scheme investors.
The move follows growing concern about the influence hedge funds are having on global markets.
The changes, which are due to be implemented by the US Securities and Exchange Commission in February 2006, will mean that hedge funds will come under massive scrutiny, with the regulator having the power to examine managersí books. All US-based hedge funds will have to register with the SEC - as well as any European or non-US funds with more than 15 US investors.
One industry analyst says this rule will mean that many of the hedge funds in which UK schemes invest will come under the auspices of the SEC.
But the rule could mean administration costs will soar, leading to reduced returns.
The US Managed Fund Association estimated that funds would have to pay around $300,000 (£164,000) in registration costs and a further £225,000-£500,000 to hire a compliance officer.
MFA president John Gaine said he was “deeply concerned” by the burdens these new rules could place on hedge funds. Man Investments chief investment officer John Kelly added:
“The worrying question is whether this puts an administration burden onmanagers which kills innovation in the industry.”
And the Alternative Investment Management Association said that the ruling could mean that non-US hedge fund managers would have to comply with multiple regulatory regimes - a move that would further disadvantage some funds.
The rule change was adopted by a vote of three-to-two. SEC chairman William Donaldson was supported by two Democrat members. Republican members, treasury secretary John Snow and Federal Reserve chairman Alan Green-span, voted against the move.
This week's edition of Professional Pensions is out now.
Nearly 60% of UK employers consider defined contribution (DC) master trusts to be the "most suitable" pension fund for their employees, according to research by Buck.
Companies which have tried to dodge their pension duties by changing their identities are being "hunted" by The Pensions Regulator (TPR) in a crackdown on non-compliance with auto-enrolment (AE).
Removing liquidity restrictions would enable DC funds to capitalise on the potentially higher and safer returns that DB schemes have benefitted from, says Patrick Marshall.