Hedge Fund Reader : German Chancellor wants to tame the ferocious funds to save his seat.

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August 23, 2005

German Chancellor wants to tame the ferocious funds to save his seat.

The world over there has been a debate for stringent and stricter control systems against the Hedge Funds by the financial authorities across the Atlantic. Leading the pack is German Chancellor, Mr. Gerhard Schroeder who has been in the forefront to call for austere measures against the tactics used by the hedge funds and private equity firms. He argued that the tactics used by hedge funds and private equity firms such as “stripping of assets” which could be a potent killer for an economy. Under this tactic the hedge fund managers and private equity firms buy a company re-capitalize its financial structure to gain artificial returns, and then sell off the company. The new owner will repeat the process and strips the company even further in order to sell it to make a profit. Mr. Schroeder made a proposal for strict international regulations to win the support of the U.S. and the U.K. at the recent G8 meeting in Scotland. However in vain, in the backdrop of the predictions that Mr. Schroeder is racking up this diplomatic debate due to the fact of the weak support he has gathered for the coming presidential elections in Germany. HedgeCo.Net Reports:

Schroeder said some hedge fund managers and private equity firms were employing such tactics. He said, "When they buy, make tough cuts, then sell the company on to a second person, who then strips the company even further in order to sell just a little bit more, then I think it is justified to look more closely at what is going on." A few months ago, Schroeder made a proposal to subject the hedge fund industry to some strict international regulations. His proposals however failed to win the support of both the United States and the United Kingdom at the G8 meeting held in Scotland.