Schroeder considers crackdown on hedge funds

13th May 2005, Comments 0 comments

13 May 2005, BERLIN - Chancellor Gerhard Schroeder is considering a crackdown on hedge funds following tough comments by the leader of his Social Democrats accusing foreign capital of attacking German business like a plague of "locusts", a spokesman said on Friday.

13 May 2005

BERLIN - Chancellor Gerhard Schroeder is considering a crackdown on hedge funds following tough comments by the leader of his Social Democrats accusing foreign capital of attacking German business like a plague of "locusts", a spokesman said on Friday.

The finance and justice ministries had been asked to study whether more transparency was needed for hedge funds operating in the country, said Schroeder's chief spokesman, Bela Anda.

SPD chairman Franz Muentefering has in past weeks repeatedly attacked big business. The party faces a tough re-election bid in North Rhine-Westphalia state on 22 May with its core left-wing supporters unhappy over government tax cuts and unemployment benefit reductions.

There is no exact legal definition of a hedge fund. Such funds are managed pools of capital usually for wealthy investors. Among tactics used by such funds are heavy borrowing to increase portfolio size for investments.

High levels of borrowing mean firms bought by hedge funds are sometimes squeezed for cash, as is reportedly the case with the German bathroom fixtures company Grohe which was bought by America's Texas Pacific Group and Credit Suisse First Boston Private Equity.

Despite making profits of 20 percent, the new investors are demanding at least 28 percent profits and are poised to close at least one of the company's five plants in Germany - even though all are making a profit, said the newspaper Die Welt.

DPA

Subject: German news

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