These industries have drawn popular anger and post-financial meltdown scrutiny - but Britain, host to many of the leading funds and firms, fears potentially losing a cash cow with cachet to non-EU nations like Switzerland and Singapore.
The tussle could align Cameron more tightly with the United States, which is also cautious about an assault on hedge funds.
"I think it's an opportunity," said Victoria Honeyman, a lecturer in British politics at the University of Leeds, of the EU vote. "It may well give them additional links between them." Throughout Britain's election campaign, Cameron strongly opposed regulatory changes that would lock foreign funds, including US funds, out of entry to London - Europe's main private equity center and home to 80 percent of the region's hedge fund industry.
His Conservative Party has a strong streak of skepticism toward EU headquarters in Brussels, while London's hedge fund heartlands Mayfair and Belgravia, with their luxury car dealerships, designer boutiques and expensive restaurants, have thrived on money from the largely unregulated funds. The funds cater to rich or institutional investors and promise outsized returns for similarly outsized fees - often using risky leverage, or borrowed money, one of the practices the EU seeks to limit.
For London, long New York's rival as the world's premier financial center, the consequences of the proposed EU legislation would be enormous. Industry heavyweights have already threatened to head for Hong Kong, Singapore and Switzerland to escape the new rules.
Among the firms that have already begun packing up their offices are Brevan Howard Asset Management LLP, Europe's largest hedge-fund manager, which has said it plans to move staff to Switzerland. The third-largest, BlueCrest Capital Management Ltd., shifted its head office to the tax haven of Guernsey and is reportedly considering moving staff to Singapore.
Andrew Baker, CEO of the London-based Alternative Investment Management Association, warned in a letter to Jean-Paul Gauzes, the French lawmaker responsible for pushing through the proposed changes, that the draft legislation is an "unprecedented attempt at closing Europe's borders." Cameron made a last ditch plea - a day after taking over from Labour's Gordon Brown this week - for the EU to delay Tuesday's vote of finance leaders on a draft proposal of the new regulations to cover the 27-member bloc.
In a clear sign of Britain's loss of influence with Europe, that was turned down with little ceremony and diplomats say that Cameron's Treasury chief George Osborne will almost certainly lose the actual vote.
The new laws would likely require managers of large funds doing business in Europe to register with local market regulators and to regularly inform supervisors about their trades and risk exposure to prove they don't pose a threat to the financial system.
They would have to disclose their overall trading strategy, their risk management system and explain how they value and hold assets - and be obliged to hold a minimum level of capital to cover potential losses.
It is unclear if the new rules - as they stand - would actually prevent US funds from being marketed in Europe.
The key is whether the version of the rules that is passed would bar the marketing of funds in Europe if they are based in more lightly regulated locations such as the US.
The United States is worried enough that Treasury Secretary Timothy Geithner has written to Europe's commissioner for financial regulation, Michel Barnier, expressing concerns that European regulations would discriminate against American firms.
With the new British government appearing isolated, Cameron has moved swiftly to capitalize on his government's allegiance with the United States. He immediately dispatched new Foreign Secretary William Hague to Washington for meeting with Secretary of State Hillary Rodham Clinton on Friday.
"Gordon Brown didn't have a particularly good relationship with (President Barack) Obama, and while there's no guarantee that Cameron will have a better relationship, there's quite a lot of common ground," said Honeyman.
At home, Cameron is likely to be given a pass by industry leaders on his failure to sway the EU.
"He can just blame Europe," she said, likely strengthening his party's anti-EU outlook.
Cameron eventually may find his effort to steer closer to the US complicated by his coalition partner, the staunchly pro-European Liberal Democrats. Their leader, Deputy Prime Minister Nick Clegg, is a former member of the European parliament.
Honeyman said this early test of their unusual alliance was also unlikely to result in a rift after they did a deal "to agree to disagree on Europe." "Six or 12 months down the line, it might be different, but at the moment, the feel-good factor is still there," she said.
