Looking into “Chinese Boxes”: Hedge funs and the Eu’s draft directive CEPS Conference, Brussels, Poul Nyrup Rasmussen PES President

They were all in the same boat Collapse of the credit bubble ”The trigger” Sub-prime Investment- banks Credit Rating Agencies Hedge- funds Private Equity IMF Global Stability Report (April 2008): “There was a collective failure to appreciate the extent of leverage taken on by a wide range of institutions […] and the associated risks of a disorderly unwinding”

Only the banks to blame? The claim by the PE and HF industry : The crisis is a result of excessive risk-taking in regultated banks and other financial institutions – not PE and HF’s activity. Answer: They were all in same boat! Not enough to look at the originators of loans – we need to also look at the demand side.

S&P (September 2008) Looking af 55 entities that have defaulted globally in the first 8 months of In 70% of the cases, private equity had been involved in transactions at one point or another.

Could LBO’s have triggered the crisis? " Perhaps it has just been sheer luck that some multi-billion mega LBO deals were not the first to trigger a similar crisis" "Private Equity: Boom and Bust?" Journal of Applied Corporate Finance, 2007, Vol. 19 (4) REMEMBER: Long before the crisis there were structured problems with LBO’s

Super light touch: 10 loopholes in the COM proposal 1)Only EU managers 2)Pure formality – no requirements 3)Massive exemptions (min. 100 mio/500 mio. Euros) 4)No capital requirements or liquidity 5)Insufficient transparency 6)No real disclosure on portfolio companies 7)No initiative on market disruption by non-EU funds 8)No regulation of naked short-selling 9)No specific protection of institutional investors 10)Nothing on tax evasion

The Road to Recovery and progress A smart green growth and jobs strategy New financial market regulation Reductions in climate change emissions A Social Progress Pact Workers’ rights, incl. Posting of Workers Directive

This crisis is not a law of nature!  Let’s turn it into new opportunities  A New progressive roadmap for sustainable jobs