03 April 2009

AIMA G20 reaction statement

“We are very glad that the G20 has made such a significant commitment to financial stability. Last year was the worst year on record for the world’s hedge fund industry and of course our members want stability returned to the global economy as much as everyone else. The issue of financial stability is the most important currently facing global policy makers and so we welcome the new Financial Stability Board and look forward to working as closely with it as we have with its predecessor, the Financial Stability Forum.
We are determined to do everything we can to assist international policy makers in preventing systemic instability in the future and the most important way we can do that is through the provision of information. If policy makers can get, through improved information, a better sense of concentrations of risk in global financial markets, then they will be better placed to prevent future instability.
We have already offered to play our part in providing this information – in our new policy platform of the 24th February we supported the provision of systemically significant information by large hedge fund managers to their national regulators. Our new policy platform also stressed our support for a global manager authorisation-supervision template. The Alternative Investment Management Association ("AIMA") took the lead on behalf of the hedge fund industry globally in these respects and this is an endorsement of our position.
Of course it is right that systemically significant institutions should be subject to oversight. We would however note the conclusions of Lord Turner in his recent Turner Review who pointed out that hedge fund leverage “is typically well below that of banks – about two to three on average” compared with levels of up to 50 times with some of the banks; and that “hedge funds in general are not today bank-like in their activities”. Although we agree that any entity that provides banking services should be regulated as a bank, the vast majority of hedge funds do not fall into this category.
The current crisis is a banking crisis and the major international reports on it so far have concluded that the hedge fund industry’s role was marginal. Indeed we think that there is increasing awareness that our industry can play a positive role in assisting the recovery because of the willingness of hedge funds to provide counter-cyclical risk capital. The US has taken the lead in this respect with the Public-Private Investment Program and we hope that other countries will follow this lead.”

Andrew Baker, CEO

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