BERLIN, July 25 German Finance Minister Wolfgang
Schaeuble wants to limit direct investment in hedge funds to
professionals in order to protect private investors from risky
assets, via a new bill regulating alternative investment funds,
his ministry said on Wednesday.
"Interests in single hedge funds will in future only be able
to be held by professional investors," reads a draft of the bill
on investments, which was published on the finance ministry's
website and is being discussed with the investment industry.
"To reinforce the protection of investors, private investors
will no longer be able to invest directly in this high-risk
class of investments," says the 545-page document.
The draft bill will be submitted to Chancellor Angela
Merkel's cabinet for approval after the summer break and has to
be enacted by July 2013 to comply with new European Union rules
on riskier investments, said a finance ministry spokesman.
"The stated aim of this law is to provide protection to
private investors against especially risky investments," finance
ministry spokesman Johannes Blankenheim told a news conference.
Tougher EU rules for hedge funds are part of a wider move to
stricter regulation of the financial industry in the wake of the
financial crisis and the euro zone sovereign debt crisis.
Private investors' access to hedge funds would be limited to
"umbrella" hedge funds which spread the risk across a number of
funds, and which will in future have to carry a health warning,
reads the proposed bill.
Any sales prospectus for an umbrella hedge fund would have
to carry the advice: "The finance minister warns: this
investment fund invests in hedge funds, which are not subject to
any legal limitations on leverage or risk."
German media said the investment industry is unhappy with
Schaeuble's plans. The Berliner Zeitung newspaper quoted Frank
Dornseifer of the Association of Alternative Investments (BAI)
saying as saying the prohibition was "contradictory".
(Reporting by Stephen Brown and Gernot Heller; Editing by David