Hedge funds are getting an unlikely source of support from a higher power.
The Church of England is coming to the rescue of the industry, raising its concerns about proposed European alternative investments directives.
The Church, a major hedge fund investor, is afraid that the proposals will restrict its ability to “generate funds to pursue our charitable missions and thus reduce our impact for public good.”
In a letter it sent to the House of Lords EU Committee, the Church says that its combined investment portfolios are worth an approximate £19.5 billion and while it supports the goals of the proposals, it thinks they should be dropped. In particular, limitations on leverage could limit returns to the Church’s fund investments.
The Church says that the leverage proposal lacks of clarity about both the level of the limits and the mechanisms for setting that level. In addition, the proposal is is very restrictive and “will reduce returns.”
The concerns stem from reform efforts led by self-proclaimed hedge fund “boogeyman” and former Danish prime minister Poul Nyrup Rasmussen. The regulation would include a limit on leverage and require the use of European banks. Last month, he also said he wanted to cut hedge fund fees and require a switch from the 2/20 model they typically charge, to a 0.5% and 15% structure, adding that managers just need to get over it because they will still not “die of hunger.”
“Maximizing the returns on our investment portfolios is an essential part of delivering our Foundations’ missions, for the benefit of society,” the Church argues. It’s a smart little bit of moral jujitsu: arguing that hedge funds are actually serving the cause of compassion rather then being sources of greed.