Why The EU Must Come To Its Senses
In the wake of the financial crisis that began in 2008, nearly every developed country has discussed and proposed heightened regulation for managers of pooled investment vehicles—primarily hedge funds, but also private equity funds, venture funds and real estate funds. Notwithstanding that there is ample room for debate as to whether the activities of those managers contributed to or exacerbated the crisis and whether more stringent regulation could have prevented it, legislators and regulators are capitalizing on current popular support for governments to “do something.” Perhaps the most aggressive proposals have come from the European Union, in the form of the EU Alternative Investment Fund Managers Directive. The Directive’s professed objectives are investor protection, market integrity and stability, the prevention of systemic risk, the elimination of “social externalities” (whatever that means), domestication of non-EU based funds and taxation of such funds’ revenues—quite a tall order. The Directive is filled with references to “orderly markets,” with not one use of the phrase “efficient markets.”
