BRUSSELS: A European parliament committee working on the proposed directive will not impose limits on the amount that hedge funds and private equity firms can borrow to invest. Instead, it will give general guidance, leaving it to national regulators and the future pan-European supervisory body to intervene. The measure will please the hedge fund industry in Britain, which has lobbied against any leverage limits as hedge funds typically borrow large amounts. The UK government, led by City of London minister Lord Myners, has also voiced concerns about the proposals as most European hedge funds and private equity firms are based in London. “We won’t give any figures on leverage, but if the [national and European] regulators identify risks, they will be able to point it out,” said Jean-Paul Gauzes, the committee’s rapporteur. Gauzes, a French conservative MEP, listened to evidence from bankers, fund managers and regulators as the EU Parliament started its investigation into the subject. In a few weeks, Gauzes will come up with suggestions that will have to be agreed by the 48-member committee, and then by the council of ministers, before the draft becomes law. Leaving hedge funds without borrowing limits will disappoint the European socialist party, which advocates borrowing caps to avoid a repeat of the collapse of Long-Term Capital Management, the US hedge fund that failed in 1998 after risking billions of pounds of borrowed money. “We need to guard against risk because the reality is that hedge funds get better returns because they take more risk — it could happen again,” said Arlene McCarthy, the committee’s vice-chairman and a Labour MEP. Gauzes still has to decide on the proposal to restrict European-based funds to employing EU nationals — leaving out the important US hedge fund community. “We have to make Europe a fortress, we need European regulation,” Gauzes said.