City A.M. Reporter
Sweden, holder of the European Union presidency, wants to ditch a proposed borrowing limit for hedge funds in a move that will please Britain but anger France and others seeking tougher control of the secretive industry.<br /><br />Although hedge funds did not play a central role in the financial crisis, politicians remain suspicious of their activity, prompting the European Commission, the executive arm of the European Union, to draft rules to keep close tabs on them.<br /><br />But Sweden, concerned that European Commission draft rules could drive hedge funds out of European jurisdiction, is understood to have proposed a radical compromise. <br /><br />It is trying to broker a deal with European Union countries to drop a central part of the proposed rules -- a cap on borrowing for hedge funds, which are best known for making bets on company stocks rising or falling. <br /><br />They propose abandoning the proposed cap on the amount of money hedge funds can borrow. Instead they want an industry watchdog to monitor hedge funds and decide when to clamp down on their activity by imposing borrowing limits.