EU to make proposals on hedge funds next month

The European Commission will make proposals on hedge funds and private equity next month, the head of the EU's executive arm said on Tuesday.

"About actions relating to hedge funds and private equity, Commissioner (Charlie) McCreevy has told me that we will be able to present those proposals in December," Commission President Jose Manuel Barroso told the European Parliament.

The EU assembly has asked the Commission, which has the sole right to initiate bloc-wide financial regulation, to introduce oversight and capital requirement rules for hedge funds and private equity, two lightly regulated sectors.

McCreevy, the 27-country European Union's internal-market commissioner, had until the end of the year to respond to parliament's call but had already said no regulation was needed.

McCreevy has come under heavy pressure to reverse that position, though it remains unclear whether he will propose regulation or a softer form of intervention.

The hedge fund industry — seen by some policymaker critics as having amplified sell-offs in banking shares — has sought to fend off regulation by coming up with a code of best practice.

Leaders of the G20 group of industrial and developing countries agreed at a summit last weekend that hedge funds and private equity funds should speed up agreements on unified best practice.

Hedge fund consultants Kinetic Partners said on Monday that fewer than one in ten UK-managed hedge fund firms planned to sign up to the Hedge Fund Standards Board's (HFSB) code.