A personal finance blog dedicated discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.


Wednesday, June 08, 2005

Hedge Funds Face Regulations

Hedge funds are facing regulation by the SEC. In an excellent article($) in today's WSJ, Gregory Zuckerman lays out the reasons for concern. Among them:

1. More pension plans, endownments and charities have shifted into hedge funds.
2. More investors today meet the wealth requirement of $1,000,000 in net worth - which is about to be raised to $1.5 million in the near future.
3. There are an extimated 8,000 hedge funds that manage $1 trillion in assets.
4. The growth of hedge funds and the fact that they often use borrowed money when taking positions means that they are now playing a much bigger role in the day-to-day price movements of stocks.

The proposed rule change would take effect in February 2006 would require:

1. hedge funds to be subject to audits and inspections
2. background information on hedge fund managers and executives
3. details on trading strategies and how they value their portfolios.

As of right now, only 35% of hedge fund managers are registered with the SEC.

While we are talking about hedge funds, the latest issue of Fortune has a cover story on hedge funds.

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