Hedge funds and Private Equity - PES

At the same time the PES Group took full account of the present lack of coherent analysis and
reflections on how to tackle the new trends on the financial markets – in the interest of our
societies.
Therefore, we decided to establish our own group of experts (henceforth referred to as PES-
Experts – Reiner Hoffmann, Christen Amby, Giovanni Di Corato, Jeppe Jørgensen, Michel
Aglietta, Norbert Kluge, Pierre Bollon, Will Hutton, Paul Windolf, Andrew Watt, Lothar Kamp,
Mick McAteer, Roland Köstler, Sam Ironside, William Melody, Norbert Wieczorek) and with them
to analyse the situation and consider the need for regulation. The group has now finished
“Capital funds in Europe – a critical analysis”, reflecting discussions during the period July –
February 2006/2007.
From the outset we insisted that this report should not be based on feelings or our perspective
but on facts and a very clear commitment to the future of Europe – the “Europe of Excellence”,
the New Social Europe, the Lisbon Process.
Therefore, the report is based on a number of case studies from the real economy – to document
the strategies and the pattern of reactions followed by most private equity funds.
Accessible studies, analyses, information and updates have been integrated into our work –
supplemented by our own experts’ analysis.
Our analyses have shown that some hedge funds and private equity funds contribute to making
capital markets function more efficiently, to making some passive, corporate business managers
more pro-active and ensuring returns to investors, pension funds etc.
However, overwhelming evidence and practical experience show that most of their activities raise
serious concerns and problems in the real economy, e.g. the impact on long-term investment in
R&D, new technology etc. in co-operative businesses, jobs and working conditions, investor
protection and systemic risks to the stability of the financial markets.
Finally, this report considers a number of tentative proposals that should provoke discussions
on the objectives and form of future regulatory issues – incentives, codes of conduct, monitoring,
regulations – by member states as well as the European Union and other international bodies.
We deeply believe in a transparent, well-regulated market economy as the basis for the social
economy in our welfare states and in the future global economy. But we also strongly believe
that such regulatory measures have to be stronger than the “light touch regulation” proposed by
the Alternative Investment Expert Group of the European Commission. Otherwise, we will simply
weaken the future of our companies, industries and services, and the capability to be at the front
of the added value chain, which requires constant high investment in knowledge, research and
advanced employment – more and better jobs. And our Lisbon goal – “to become the most
competitive and dynamic knowledge-driven economy in the world, capable of sustainable
economic growth with more and better jobs and greater social cohesion” – will surely be under
threat. There is a better way.
Ieke van den Burg Poul Nyrup Rasmussen
Foreword
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