Hedge Fund Intelligence Sir Michael Hintze interview | страница 5

interview
in my mind. There are still long-tail issues, such as those in France,
but I think these are relatively low probability.

Q

  e still don’t know how serious the social tensions might
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become in many European countries…

MH The social tensions are massive. And remember that France did
not vote for Maastricht the first time around.

Q

  he world seems to be very concerned as to whether the
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Chinese authorities will sort out the country’s problems and
avoid a hard landing. What are your current views about China?

MH In China, you now have new leadership which I have a lot of
respect for. The senior people we met there are smart, educated and
generally joined up in their thinking. The previous leadership group
was very much focused on economic growth and so the People’s Bank
of China’s balance sheet expanded dramatically and is now close to $5
trillion. The economy is about $9 trillion and I don’t think anyone is
focusing on that. Therefore, it’s unclear whether they have any room
for manoeuvre. What is different about their monetary stimulus is
that it has been sterilised.
They are also experiencing massive urbanisation. I don’t know how
wise that will be because they will be taking 200 million people off the
land and moving them to cities. I’ve been to China and you can see
they are constantly building and constructing railways there. But is
that where the jobs are going to be? Labour costs are rising and that
will probably make them less competitive as a manufacturer. The new
leadership is trying to be more inclusive and seeking to shift the economy from being a manufacturing to a service economy.
So, as China slows down, the good news is that the US is becoming more competitive as a manufacturer and is picking up some of
the slack. Meanwhile, Europe is trying to work its way through a
whole range of issues.

Q

  an you foresee the UK exiting the EU, and would that pose a
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serious threat to London’s role as a top global financial centre?

MH If the UK were to leave the EU, it’s not clear to me that it would
be as bad as some imagine. There will still be massive trade between
the UK and the EU. I’m not suggesting it would be an easy journey,
but I don’t think it would be disastrous. Having said that, I would
rather we had a Eurozone which looked more like a free trade zone
rather than someone trying to designate the size of eggs in Germany
as well as in France and the UK.

Q

  here has been a lot of excitement about Japan as many
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people think perhaps the dawn has finally arrived. Are you
excited about Japan?

MH Japan is fascinating. It has joined the currency devaluation
wars and is aiming to have a more competitive economy. In
particular, exporters will on balance benefit most, so our focus has
been on exports and we have been adding to positions recently on
market weakness. Overall, I think the direction of travel is very
positive for Japan.

38 Global Review Autumn 2013

Q

  hat sort of opportunities do you believe have opened
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up with the disparities in global regulation that have
taken place?

MH Government intervention and regulation – Basel III, DoddFrank, a myriad of EU regulations... and it goes on – are creating
distortions and opportunity for investors like us. For example,
in response to Basel III, banks have got to readdress certain
risk-weighted assets on their balance sheets, which is resulting
in certain assets coming to us, especially in B and BB names. You
have Dodd-Frank’s Volcker rule, which means there are fewer
competitors for some of those assets, and we are also seeing greater
market volatility in certain asset classes. It makes the playing field
somewhat more level.

Q

  ou were one of the very first members of the Hedge Fund
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Standards Board. What are the key consequences of the
political and regulatory response to 2008 regarding the
way hedge funds operate and the changing regulatory
environment? Is it now a different game?

MH The Hedge Fund Standards Board plays an important role. We
continue to attract increasing numbers of managers and we also
have a growing investor chapter. The HFSB was established to raise
transparency in the hedge fund industry and to improve disclosure
and it continues to do an excellent job on this front.
On regulation, what is disappointing is that a good crisis has
been wasted. You need rules for markets; there’s no doubt about
that. But are we better off with more than 2,000 pages of primary
legislation in Dodd-Frank and thousands more pages of secondary legislation? It’s almost as if there is regulation for the sake
of regulation.
Look at the CLO business and remuneration in Europe. The
‘skin-in-the-game’ legislation in EU CRD (Capital Requirements
Directive) IV came close to halting the European CLO business
which is an important provider of funding for SMEs. It was never
a threat to financial stability, but it was almost regulated out of existence. For what purpose?
Do legislators really think that controlling remuneration helps?
Was that ever really the problem? It was inappropriate behaviour.
Why are they now pushing a bank’s fixed remuneration bill up and
increasing operational leverage? How is that decreasing risk?
My view is pretty simple. We need global transparency at a level
which can be understood.

>> Do legislators really think controlling remuneration

helps? Was that ever really the problem? It was
inappropriate behaviour. Why are they now pushing
a bank’s fixed remuneration bill up and increasing
operational leverage? How is that decreasing risk?
My view is pretty simple. We need global
transparency at a level which can be understood >>
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