Divine intervention for hedge funds from church and charities

The hedge fund industry has found an unlikely group of supporters in the Church of England and a number of leading UK charities.

In a letter to the House of Lords EU Committee, the church commissioners, along with charities such as the Wellcome Trust and Nuffield Foundation, voiced criticism to the proposed European Commission directive on alternative investment fund managers.

“We are concerned that the directive as currently drafted will significantly restrict our ability to generate funds to pursue our charitable missions and thus reduce our impact for public good,” the group warns.

The letter welcomed the attempt to improve regulation and protect investors, but talked of “unintended consequences”, citing articles 35, 38 and 39 of the directive in particular.

These outline limits on investing with non-EU funds and non-EU fund managers, which could “severely restrict” the groups’ access to a wide array of funds.

According to an estimate by the Alternative Investment Management Association, up to 95% of global hedge funds are not domiciled in the EU or have non-EU managers.

The group also expressed concern about proposed leverage limits that are “not adequately defined”.

The church’s position is an about turn from late 2008, when the crisis was at its height and the archbishop of Canterbury Dr Rowan Williams welcomed the ban on short selling.

At the time, think tank Ekklesia criticised the church’s stance, pointing out that the commissioners had a large amount of money invested with hedge funds.

“Jesus pointed out that 'where your treasure is, there is your heart also',” said co-director Simon Barrow.

“Condemning others while playing the system to your own advantage will strike many as lacking the kind of integrity and creative endeavour the churches could be demonstrating.”

The church’s investment arm was hit badly by the crisis, but in its report for the second quarter of 2009, released last month, the commissioners revealed that their UK equities had returned 12.2%, ahead of the 10.9% benchmark.