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Welcome to the February issue of PERE, which you will note is heavily slanted towards the all encompassing issue of regulation.  Our themed issue brings you the latest on all the major pieces of legislation affecting the private equity real estate industry, including the Volcker Rule, Form PF, the Alternative Investment Fund Managers (AIFM) directive, the Jumpstart Our Business Startups Act and the Foreign Account Tax Compliance Act.

In particular, I would like to point out Jonathan Brasse’s special report on Morgan Stanley’s strategy for Volcker. Starting on page 10, the real estate arm’s chief financial and operating officer walks PERE through its plans to bring its only outlying fund – Special Situations III – into compliance. I also would highlight our roundtable discussion from Luxembourg, where a group of professionals stressed that AIFM is about more than just compliance. Beginning on page 42, they explain how managers could be badly ‘missing the boat’ if they don’t also realize the directive is about how to best structure your business to operate in the Eurozone.

Of course, there are other regular features to digest in this issue, including our regional news analysis section and our monthly Blueprint interview, where The Blackstone Group’s Asia team comes under the microscope. From page 32 onward, we explore the firm’s investment process and how Asia is expected to become a bigger part of it over the coming year.  Still, it is regulation that runs through this issue like a British stick of rock.

Admittedly, whichever way you look at it, there is no doubting you will have to live by regulation, whether you are based in the Americas, Europe, Asia or somewhere else in the world. Still, here is a skeptical way of thinking about it: “One of the greatest delusions in the world is the hope that the evils in this world are to be cured by legislation.”

That quote, in case you are interested, has been attributed to Thomas Reed, a former Speaker of the US House of Representatives in the nineteenth century. So, what can we say about legislation in the 150 years since he was alive?

To be fair, many in the industry might share Reed’s skepticism. For example, there are many that have a problem seeing why the Volcker Rule should impinge on banks wishing to invest a significant amount of capital into a real estate fund they manage.

Ditto Europe’s AIFM directive. What began four years ago as something to regulate hedge funds and ensure the Bernard Madoff scandal could never repeat itself has engulfed real estate funds. Still, live with regulation we must.

Enjoy the issue,

Robin Marriott
Editor, PERE