A hedge fund manager appointed to the Bank of England’s monetary policy committee (MPC) has succumbed to pressure about potential conflicts of interest by severing financial links with his former employer.
The appointment of Gertjan Vlieghe, a former partner and senior economist at hedge fund Brevan Howard, to the rate-setting committee was announced on Tuesday but prompted concern about his remaining ties to the investment firm. He was to have retained a financial interest in Brevan Howard, which is a partnership. This would have allowed him to receive long-term incentive payments based on the hedge fund’s size, according to a report by Reuters.
However, after the Treasury select committee said it would scrutinise his appointment, Vlieghe announced he would be bought out of his partnership at one of Europe’s largest hedge funds. However, he did not disclose the value of his stake.
“Despite the fact that there would be no conflict of interest between my future role and any continued passive stake in Brevan Howard, we have now come to an agreement whereby I shall be bought out of my remaining interest in the partnership before taking up my position on the MPC. As of 31 August 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,” said Vlieghe.
He is to take up his position on the MPC in September, replacing David Miles for a three-year term. Vlieghe, a dual British-Belgian national, joined Brevan Howard after stints at Deutsche Bank and the Bank of England, where he had been economic assistant to the previous governor, Lord Mervyn King.
He will be one of four external members on the nine-strong MPC, which next week will give its latest decision on interest rates alongside its view on the state of the economy. Bank of England governor Mark Carney has told borrowers to start preparing for a rise and hinted it could happen around the turn of the year.
The Treasury had insisted that Vlieghe, who has a PhD from the London School of Economics, did not face a conflict of interest. It had said on Thursday: “All MPC members are bound by the MPC’s code of conduct. As is usual practice when making external appointments of this nature, potential conflicts of interest are considered by the Treasury and the Bank of England, and the MPC code of conduct is applied rigorously at all times.”
Matthew Oakeshott, chairman of the pension fund manager Olim and a former Liberal Democrat Treasury spokesman in the Lords, said: “Anyone with an ounce of common sense would have spotted that conflict at once.”
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