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EU attacked for 'sledgehammer' approach to private equity
By Martin Arnold in London
Published: May 8 2009 03:00 | Last updated: May 8 2009 03:00
Some of Europe's biggest private equity investors have attacked new European regulations as "a sledgehammer to crack a nut", likely to push up costs without delivering much benefit.
The European Commission says the main aim of its proposed mandatory registration of managers of alternative investment funds is to protect professional investors, such as pension funds and insurers.
But Wim Borgdorff, head of fund investments at Alpinvest, Europe's biggest investor in private equity, said the rules were an additional burden that would increase costs that "at the end of the day will be passed on to investors".
"I don't see the benefits, but I do see the costs, which will create lots of red tape," said Mr Borgdorff, who oversees a 40bn ($52bn, £35bn) portfolio of investments in private equity funds.
Private equity was the wrong target for EU regulators in the search to control systemic risk in the financial system, he said.
The proposals, drawn up because of public anger over the excessive risk taking that caused the credit crisis, would require all alternative fund managers to register and to seek government authorisation.
Managers of hedge, real estate, commodity, infrastructure and private equity funds would face extra reporting obligations to investors and regulators, as well as new governance and risk management standards, including minimum capital requirements.
"We all know that private equity is not the place to start on all this," Mr Borgdorff said.
Several investors with large private equity portfolios told the Financial Times that by regulating what information private equity funds must provide to investors, the Commission was addressing a problem that did not exist.
Carole Kennedy, of Pantheon Ventures, a $23bn private equity fund of funds, said the only beneficiaries of the rules would be service providers such as independent valuators and auditors.
She said. "It is a sledgehammer to crack a nut, and a very expensive, gilded sledgehammer at that."
She added that a proposal to make all private equity groups employ an independent valuator for each of their funds was an unnecessary extra expense.
George Anson, managing director for Europe at HarbourVest, a $29bn private equity fund of funds, said: "I don't think this is appropriate for private equity. Where is the smoking gun in the private equity world? I just don't see it."
www.ft.com/indepth/privateequity
