South Africa doesn’t want to deter hedge funds from operating in the country by introducing overly restrictive industry rules, the Financial Services Board said.
“I don’t think our intention is to cause a flight of hedge funds out of the country because the regulation is too tight,” Patrick Ward, the head of the regulator’s collective investment schemes unit, told the Hedge Funds World Africa conference in Cape Town today. “It’s a balance we are seeking to achieve.”
South Africa’s regulator expects draft legislation for hedge funds to be adopted by the first half of 2012, and still has to decide whether they will be governed by the same rules as mutual funds. While hedge fund managers are currently regulated in South Africa, the funds they oversee are not.
The U.S. and European Union have stepped up regulation of the hedge fund industry blamed by lawmakers for exacerbating the financial crisis. Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
Hedge funds offered to private individuals or funds where pensioners’ savings are invested should be subject to tighter regulation, Ward said.
“We wouldn’t want that investors who participate would be exposed to any greater extent than the investment they put into the fund,” he said.