Executive summary - Udo Bullmann

industrial policy, focusing on knowledge and information, and smart green growth. But, toachieve these objectives, long-term, patient investment is crucial.We still believe in the market but it must be a “social market economy”, not a “marketsociety”. This fundamental distinction was reiterated in the spring 2005 communication fromthe European Council, which quotes the draft vision for a European constitution of a “highlycompetitive social market economy”.The decisive question is - to what extent the growing sector of “alternative investmentfunds” - the hedge funds and private equity funds - conform and contribute to a positive,efficient and long-termist role for the capital markets in financing the enormous amount ofinvestment needed to make a “Europe of Excellence” in the real economy? Alternatively - towhat extent the activities of hedge funds and private equity funds are inimical to the widersocial interest, extracting rather than creating value, and leaving others in the society to pickup the cost?Answers could not be found in existing, actual information or analyses. Neither,unfortunately, can we expect answers from the European Commission.In July 2005 the European Commission launched a public debate on possible ways toenhance the European framework for investment funds. The Commission established a coupleof “Alternative Investment Expert Groups” to describe “how they see the future developmentof the hedge funds and private equity funds in Europe, and whether there are any Europeanlevelregulatory or other obstacles which hold back the efficient organisation of the businessin Europe”. But the purpose of the reports as described seems to presuppose that the majorproblem is too much existing regulation. In July 2006, the result of this work was publishedin two reports titled “Developing European Private Equity” and “Managing Servicing andMarketing Hedge Funds in Europe”.The PES-Group in the European Parliament welcomes that the European Commission hasdrawn attention to the alternative investment market in general and private equity funds andhedge funds in particular. However, the PES-Group is critical of the fact that the two reportshave been drafted by expert groups, mostly consisting of representatives of organisations witha strong interest in the “light touch regulation” of alternative investment markets, which bothreports duly proposed. Moreover, the PES-Group is deeply concerned by the strong bias inmany of the analyses of the reports. A bias towards deregulation is even more striking in thepolicy proposals derived from these analyses and the reports fail to address a number ofpivotal issues. This work - at the behest of Commissioner McCreevy - is in stark contrast tothe very well documented worries expressed in reports from among others the ECB, and theWorld Bank. The PES-Group first voiced its criticism in preliminary comments to theEuropean Commission’s two reports by the so-called “Alternative Investment ExpertGroups”.At the same time the PES Group took full account of the present lack of coherent analysisand reflections on how to tackle the new trends on the financial markets - in the interest ofour societies.***