The EU believes that if a fight breaks out in a bar, you don't attack the person who started it. You bash the person you don't like instead. Some analysts believe that the European Union's proposed Alternative Investment Fund Managers directive is disparaging.

The apparent reason for this pay proposal is that hedge funds create "systemic risk". However unlike the banks, no hedge funds had to be rescued by governments. One suggestion is that funds are being paid back for lobbying too hard against the original draft of the directive. The revised version is being scrutinized by the Council of Ministers before it goes to the European Parliament. Some fund managers are already talking of heading to Switzerland unless the directive is changed.

The original draft, launched without proper consultation, contained some sensible rules on registration but threw in a bunch of protectionist proposals that would exclude American funds from marketing in the EU. A report commissioned by the European Parliament on the draft concluded that it was "poorly constructed, ill-focused and premature."

The Swedish presidency recently returned with a "compromise proposal" designed to deal with the criticisms. They dropped the idea that leverage limits (the amount funds can borrow) should be set on an industry-wide basis; instead, that will be up to national regulators. The protectionist element was slightly toned down, though the rules still discriminate against funds (and service providers) based outside the EU.

Hedge-fund and private-equity fund managers certainly earn a lot, but they are not paid in the same way as bankers are. Most firms are set up as partnerships, so the money that goes to star performers has not been earned at the expense of shareholders.