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Which damages from the Eu rules on hedge funds?

The European Union is adopting new rules on hedge funds and private equity. Those funds will be required to be based and managed in the Eu, to limit their leverage, and to assure more transparency.

On this regulation, there are three issues at the stake. The first one is about liberty: is individual economic freedom impaired by these rules? To answer to this question, we need to wonder whether the founders of a hedge fund or of a private equity fund is forbidden to operate in European Union. The answer is no, they do not: they have just to follow some rules, similar to road traffic laws. Will those rules impose unbearable costs? It doesn’t seem so.

The second issue is whether these rules are a form of “protectionism in drag”. Generally speaking, only the requirement on location can become a supplementary cost for a non-Eu company, and can restrict competition. Maybe this rule can be reviewed, but European investors need to individuate – and actually sue, in case – who manages their money.

The third issue is whether those rules are convenient. It is true that the real problem, short-term debts and their use and abuse, is not broadly addressed. Hedge funds are only a part of a larger concern. In any case, transparency, which is reciprocal, is more than useful. And each other requirement – a location in Eu, a cap in leveraging, and so on – can stabilise the financial markets and even create new opportunities. Of course, the Eu has to assess the real economic and financial effects of this regulation, which is not eternal and can be changed if it would harm the European economy.

Too many people are confusing, today, economic individual freedom, the rights of corporations, absence of rules, and economic convenience; Please, don’t.