New Bank of England policymaker says to cut all hedge fund ties
By David Milliken
LONDON (Reuters) - New Bank of England policymaker Gertjan Vlieghe said on Friday that he would sever all links with his previous employer, one of the world's biggest hedge funds, to avoid "any mistaken impression" of a conflict of interest.
Vlieghe had wanted to stay part of a long-term incentive plan at Brevan Howard, where he was a partner, after he joins the BoE's Monetary Policy Committee on Sept. 1.
The arrangement would have provided him with payments based on how much money was managed by the fund. Its traders make bets on the impact of central bank decisions.
Britain's finance ministry said on Tuesday, when it announced the appointment of the 44-year-old economist, that Vlieghe's stake in Brevan Howard did not pose a conflict of interest.
But this caused surprise in financial circles and drew attention from a parliamentary committee that monitors the BoE.
On Friday, Vlieghe said in a statement that he had reached an agreement to be bought out from his stake.
"As of August 31st I will have severed all financial and other ties with Brevan Howard. I have taken this step to avoid any mistaken impression of a conflict of interest," he said.
A source familiar with the arrangement had said previously that it would be impossible for Vlieghe to sell his stake at close to its fair value.
Vlieghe returns to the central bank, where he previously worked as an economist, at a sensitive time. The BoE is edging closer to raising interest rates for the first time since the 2008-09 financial crisis.
Economists who know Vlieghe praise his analytical skills.
Brevan Howard is one of the biggest players in the $3 trillion hedge fund industry. In May, it and other financial institutions came under scrutiny after European Central Bank Executive Board member Benoit Coeure spoke at an invitation-only dinner of fund managers, bankers and academics in London.
At the dinner, which was organised by institutions including a research institute sponsored by Brevan Howard, Coeure made comments which moved the euro hours before his speech was made public.
Conservative lawmaker Andrew Tyrie, who chairs the British parliament committee that vets new BoE policymakers, said on Thursday he would seek reassurance that Vlieghe's business interests did not conflict with his MPC role.
At the same time, Tyrie also said it was important that conflict of interest rules were applied in a way that did not restrict the BoE's access to talented economists.
Former BoE policymaker Andrew Sentance said the way rules were applied in the past could put off economists coming from a commercial rather than an academic background.
(Editing by William Schomberg/Mark Heinrich)
