In the United Kingdom, Pensions Join Alternatives Battle

With European regulators looking to tighten the alternative investment collar, UK pension funds – who now, more than ever, need the excess returns that alternatives are purported to provide – have stepped into the battle.

(August 12) – With controversy swirling around proposed European rules that would see regulators curb leverage, raise capital requirements in case of redemptions, and significantly increase transparency for alternative investment managers, previously-quiet UK pension funds have now stepped into the fray, asserting that such rules will only cause harm to institutional investors.


While hedge fund lobbying groups have loudly and unsurprisingly proclaimed their opposition to such regulation – the Alternative Investment Management Association (AIMA), a global hedge fund group, has claimed that the draft directive issued by the European Commission will cost Europe’s pension fund industry up to US$35 billion a year – statements this past week by the United Kingdom-based Hermes Pension Fund Management (‘Hermes’) and the National Association of Pension Funds (NAPF) indicate that pension funds are now getting involved.

“There are unintended consequences from the structure of the directive which would lead us to have substantially smaller choice in terms of the investments we’re able to make,” said Hermes director Kathryn Graham, according to Reuters. “[It would] also, I would imagine… significantly increase costs to the investments we are able to make.” Hermes — the retirement fund management arm of communications-giant BT (and the largest corporate pension plan in Britain at US$50 billion) – fears that more stringent laws would drive some funds out of the European markets, lowering the number of funds to choose from and correspondingly raising the prices for such investments. Joanne Segars, the chief executive of the NAPF, has echoed these concerns.

The proposed regulations fail to garner complete support from elsewhere in Europe as well. Some Nordic countries, having seen outsized returns from private equity in years past, are lobbying to have such funds exempt from some of the more stringent regulation. Ireland, it has been reported by the Wall Street Journal, wants to protect its custodian industry, which would also be affected by the Directive.

European interest groups aren’t the only ones jumping into the fray, however. According to the Wall Street Journal, United States Treasury officials have also started to express displeasure with such a directive, which could, if implemented, shut out some US-based hedge funds from raising money in Europe. While the US is looking into requiring hedge funds to register with regulators, it has stopped short of any leverage limits or redemption requirements.

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To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>

The Accidental Billionaires

Mark Zuckerberg -- the founder of Facebook and now young billionaire -- is the newest subject for pop-author Ben Mezrich.

Ben-Mezrich



To those of us who grew up on the old-fashioned advice that getting ahead in the world had to do with going to the right schools, studying hard to get good grades, apprenticing ourselves to smart, older people from whom we could learn the ropes, The Accidental Billionaires will be a revelation – of the joyful or jealous kind, depending on how things turned out for us.  This is the story of the founding of the Internet behemoth Facebook – which some might say was the mother of all social networks – and the tale suggests that none of that old-fashioned advice really applies (except maybe the one about good schools: the subjects here were at Harvard).  One of the biggest companies of the decade was founded by a bunch of kids who – in author Ben Mezrich’s telling – were out for something much more basic than wealth or world dominance:  they really just wanted to get girls.

 


Maybe you know the basics of the story – that a nerdy kid who had been recruited by Microsoft while still at Exeter boarding school (he turned them down) spent one lonely night in his Harvard dorm room hacking into the freshman roster and rating girls on a hot/not hot scale.  This kid, Mark Zuckerberg, got into trouble with the Harvard brass, but his gaffe made him famous, too – and at least two groups of students began courting him to create a more socially acceptable social networking site.  One group was headed by the handsome, popular crew-jock Winklevoss twins – the other was Zuckerberg’s equally nerdy but socially more ambitious friend Eduardo Saverin.   Zuckerberg  — who declined to be interviewed for this book – played them off each other for a bit, and eventually set up Facebook with Saverin.  Enter some venture capitalists, some avaricious attorneys and assorted hangers on – and plenty of leggy young women – and within months, presto!  an Internet success story was born.  Before you could say “I want to friend you,” the site had become the talk of the national university community, and then the nation itself; today, Facebook has hundreds of millions of users worldwide.

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Such a great story would be irresistible even if written by an orangutang in a room with a typewriter.  But Mezrich is no orangutang – he’s the guy who wrote the equally engrossing “Bringing Down the House” about another bunch of smart kids – this time from MIT – who became card counters and walked away from the Vegas tables with millions of dollars.   With this novel, Mezrich has a particularly jaunty approach:  boyish himself, the 40 year old author seems to have gotten inside the hallowed halls of Harvard and the brilliant-if-difficult minds of their inhabitants.  (On Saverin and Zuckerberg’s foray into Silicon valley:  “The past few days had been a whirlwind of business, strategizing – and drinking.  Lots and lots of drinking…  Eduardo hadn’t seen Mark until the next day, and Mark had been very evasive about the Victoria Secret model.”) What he relates is a tale of brilliance and luck and foresight – but it’s also one of disappointment and dislocation.  Yes, Zuckerberg and Saverin both got rich and got bedded, but their relationship also suffered extensive damage – Saverin is openly furious about how he was lawyered out of the company —  that can probably never be repaired.  

 


So maybe the rest of us should read this as a cautionary tale about greed and competition and loss of innocence.   That’s what the therapy crowd would tell us. But some of us might admit to seeing it differently:  as a fascinating, complicated and ultimately satisfying tale of how, if you’re smart (yes, and lucky) enough, you can break all the rules and get all, or most, of what you want.  

 

(Review by Sara Nelson)