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A model regime for hedge funds

Germany is about to enact a law that will create a new asset class for investors in the federal republic that should also attract foreign investors. The star attraction of the next set of financial reform bills set to go before the Bundestag this autumn is an easing of the rules covering hedge funds.

Part of a fifth wave in a makeover of Germany's financial regulations, designed to bring Germany's banking rules into line with EU regulations, the financial modernization bill is scheduled to be read during this autumn's session and must be passed by January.

In theory, German investors can already invest in hedge funds, but the existing rules mean few have bothered to do so. As with its famous holidaymakers, the German money that goes into hedge funds goes abroad.

Grappling with gobbledegook The new rules have to be passed by a January deadline if Germany is to meet the requirements of the EU's Ucits directive on investment funds first issued in 1995, but recently updated. EU gobbledegook, Ucits stands for "undertaking for collective investment into transferable securities".

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