Nicolas Sarkozy may have declared war on hedge funds, but almost no one in the country’s rapidly expanding alternative investment sector is taking the new French president’s posture seriously. Indeed, they see it as little more than a cynical vote-getting tactic. Head of the conservative Union pour un Mouvement Populaire (UMP) party and considered an economic liberal in left-leaning France, Sarkozy spent the campaign leading up to May’s election railing against free trade, deploring the failure of European governments to protect national champions and vowing to push for more-expansionist monetary policies and greater political control at the European Central Bank. In calling for a punitive hedge fund tax, he said: “I don’t accept this type of capitalism.” He condemned hedge funds for “borrowing to buy a company, then selling it off in parts, while firing a quarter of workers, collecting a profit of 25 percent and creating zero wealth.” Says Jean-Louis Juchault, president of Systeia Capital Management, Crédit Agricole’s E1 billion ($1.34 billion)-under-management alternative asset arm: “If you look at the attitude of the regulators who are close to Sarkozy, it is 100 percent clear that his comments were designed to neutralize the left. Rules for hedge funds in France are getting friendlier by the day.”

After introducing regulations two years ago that made it legal to market hedge funds in France, the Autorité des Marchés Financiers is now working with banks and prime brokers on rules that by year-end should provide investors with recourse for damages if a fund misrepresents its solvency. That kind of peace of mind is expected to spur even more-rapid hedge fund growth in France, where alternative assets under management have grown 170 percent in the past two years, to E27 billion, and the number of funds has nearly doubled, to 279. Juchault concludes: “I think in Europe, Paris will soon be to London what Greenwich, Connecticut, has become to New York: a place where hedge fund managers enjoy a better lifestyle and cheaper operating costs.”