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US private equity industry awaits Volcker Rule announcement

10 Dec 2013

The US private equity industry is bracing itself for today’s vote on the Volcker Rule, the so-called piece of legislation that aims to curb undue risk-taking from banks and other financial institutions.

The Volcker Rule is a section of the Dodd–Frank Act originally proposed by former Federal Reserve chairman Paul Volcker. The regulation will limit the amount of capital that banks are able to hold in hedge funds or private equity to no more than three per cent

In anticipation of the ruling, a number of institutions have already begun offloading their private equity portfolios. US banking giant Citigroup is reported to be winding down its alternative investments unit as part of a continued bid to reduce its exposure to these assets, while global asset management firm Goldman Sachs has drastically cut its exposure to these assets.

US banking regulators are set to confirm the details of the ruling today, though implementation is set to continue to be a source of debate.

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