Reuters Summit - Quotes from Private Equity, Hedge Funds

Published: 25 Mar 2009 07:51:40 PST

(For other news from the Reuters Private Equity and Hedge Funds Summit, click on http://www.reuters.com/summit/PrivateEquityandHedgeFunds09?PID=500)

LONDON, March 25 - Following are key quotes from the Reuters Hedge Funds and Private Equity Summit in London. Below are some quotes from the summit's third day speakers.

SIMON WALKER, CHIEF EXECUTIVE OF BRITISH VENTURE CAPITAL ASSOCATION (BVCA)

ON ROLE OF PRIVATE EQUITY:

"We are seeing private equity in a position to help us out of the recession. That's going to take a hell of a long time. But private equity funds are sitting on a trillion dollars in funds worldwide, and 150 to 200 billion of that (is) in Europe, to be invested in the course of the downturn.

"One of the truths about private equity is the best time to invest is during the downturn.

ON FEES:

"Fee structures are changing in private equity. We are seeing that already. It's going to be part of a commercial and negotiate process.

"What's important about the old 2 and 20 system that applies to us is that although it can provide, and has provided, very substantial rewards for success, what it does not provide is rewards for failure.

"Bluntly, if you'd been using the private equity model in the banking sector I don't think you'd have the incentives to inflate risk as much as you have... We are seeing some changes already and I don't doubt they'll be more."

ON REGULATION

"You cannot regulate Europe out of recession. That will not solve the problem... People think that hanging all the bankers from lampposts will solve our economic difficulties, and it won't."

ANDREW BAKER, CHIEF EXECUTIVE OF ALTERNATIVE INVESTMENT MANAGEMENT ASSOCATION (AIMA)

ON PERCEPTION OF HEDGE FUNDS:

"There is hope of rehabilitation and redemption somewhere down the track.

"I'm still not telling taxi drivers that I work in the hedge fund industry. Give it a couple more days and I might."

"The last bit of the story that we now need to address, which we've been pushing very hard behind closed doors in policy making circles, is that there is a general perception that there is a hedge fund problem, because of the techniques that are being deployed with a whole variety of market participation.

"It's best typified by me just saying AIG financial products and Bernie Maddoff. These are not hedge funds. They are seen as being part of a hedge fund problem."

ON DESCRIBING THE HEDGE FUND INDUSTRY:

"We've had to move away from pure left-brain descriptions of what our industry does, i.e. technical market-efficient arguments, through to right-brain descriptions, which are more emotional. It's about people's savings and people's livelihoods.

ON SIDE POCKETING:

"There clearly need to be changes in the margin to cope with side pocketing... and (there) probably needs to be some kind of multi-year smoothing, to take out sudden death, year-end payments.

COLIN MCLEAN, MANAGING DIRECTOR OF SVM ASSET MANAGEMENT

ON EQUITY MARKETS:

"I don't think what we're seeing just now, as a rally, is different than the four or five we've seen in the last year. It doesn't look all that much different to this time last year, in particular.

"I still think the markets tested those November lows and have bounced off, but I still think they'll test them again.

"I think the overall economic background will see us back down at the lows of last year."

ON FUNDS:

"What we're finding is that funds that have risen very smoothly are then... falling away quite sharply and there's a number of funds of funds and credit funds where they're still going through that process. You don't need to be a Ponzi fund to have that kind of effect."

ON DIVIDENDS:

"Dividends are going to be reset, once it become fashionable to do that, more will do it. And this is different from previous cycles.

"A lot of companies misunderstand that (dividends), if you look at insurers, they maintained the dividend. I think that investors will look at stability where investors are looking for assurance on capital adequacy."

ON BANK RECAPITALISATION:

"I do expect further recapitalisation on banks. I don't think we've yet had clear statement from governments around the world about what a level of capital in banks will be supported.

"Investors would still feel apprehensive that equity in banks just turns in to warrants without any real certainity over income." (Compiled by Lorraine Turner; editing by Simon Jessop)