Govt signal to hedge funds, private equity

Nick Sherry

The Federal Government has sent a message on hedge funds and private equity, declaring that it requires greater transparency with respect to the operations of hedge funds and that it is still developing its policy approach with respect to private equity.

The Minister for Superannuation and Corporate Law, Senator Nick Sherry, used an address to the International Bar Association and Law Council of Australia Private Equity Conference to declare that the Government needed to be vigilant to ensure regulation kept pace with the most recent financial market developments.

“One of the recent developments in financial markets relates to the substantial growth in equity derivative products,” he said. “Because the owners of these instruments only have indirect economic ownership over the underlying securities, these equity derivatives have enabled market participants, including speculators and hedge funds, to avoid disclosure requirements associated with direct stakes.”

Sherry said the use of these instruments had created uncertainty and facilitated speculative trading, which put individual shareholders at risk.

He said that to address these concerns, Australia intended taking a lead in increasing the transparency of its financial markets.

Looking specifically at the regulatory environment for private equity, Sherry said the Government recognised the sector was highly mobile and that it would give due consideration to the need to maintain Australia’s attractiveness as an investment destination.