Mutual funds and hedge funds have one major factor that distinguishes them....."Management"..... Now that it has become clear that debt needs to clear and be shown ...just as does stock..... And it needs to be clear to regulators that large players are not gaming the system due to size factors..... Then it is becoming clearer that both hedge funds or mutual funds need to be listed as stocks on the public exchange.... Observe the following monthly ending balances... 25.01 25.25 24.21 23.21 Ok...does this represent a stock, a mutual fund, a hedge fund ? All that the owner of the party cares about is transparency, liquidity, and making money.... Just what hedge fund owner would object to being liquid and transparent ? The managers would pay themselves via reverse dividends.... Instead of quarterly dividend dates, there would be management payment dates.... This would simplify the process dramatically and would bid good riddance to accounting valuation trickery which has been broadly utilized especially by Lehman, MS, GS, etc...and many others.... This would also make for keener competition for funds by performance..... Also...it would make the best of hedge fund management to anyone that has a stock/bond direct access account..... Suitability ? The idea of suitability would mean that due to the recent price demise...virtually no securities would be suitable for anyone..... Leverage ? Leveraging opaque instruments with accompanying false ratings and vague accounting is what has brought the financial system to its knees.....and the current excessive volatility is due to massive redemptions by mutual and hedge funds.... The above proposal remedies this situation from ever happening again..... In terms of leverage....perhaps leverage would be reflected in 1x.2x.3x.4x shares with no margin accounts per se....at the election of the buyer..... All shares could be bought on direct access for 20 cents per 100 shares.... Why should investors keep investing in brokerage advertising models whereby they are paying $5 to $10 per 100 shares....when they should be paying 20 cents per 100 shares ?
With 100% transparency hedge funds would literally vanish in about a week. The lack of transparency is crucial. Full transparency means the public is going to drastically kill whatever edge they have. Trying reading at least a chapter of an acclaimed hedge fund book before you start threads about them.
Just the response I was expecting..... The Hedges would just dollar cost average their positions..... This is nothing new.....What is Berkshire Hathaway....and just who is Buffett....and the majority of mutual funds ? The idea of the marketplace is to take bets on the future...not just game the system....due to size or secrecy..... Product mix.....people can see a lot already.... What they cannot see are the nonpublic securities that are priced at a nonpublic price....this is an area of scrutiny that most people would agree is an are of concern...ie look at what is currently happening to the US financial system because of this nonsense... Taking positions on future bets in a collective way....and timing them from short or long positions ....is what hedge funds are all about.... Excessive leverage...vague accounting from opaque instruments...gaming the system needs to go..... There is going to be regulation in these areas anyway.....position size limitations with respect to the instrument is going to correct quite a bit of the volatility....particularly with respect to the float of whatever the instrument is...... So what if I have the stock...it is the price and timing that matter... Gaming the system is no different than the old mutual fund switching tactics.....finding an edge due to gaming the system should be done away with....Averaging prices because of earnings prospects is an honest approach..... Other tactics such as gaming the float etc...should be restricted....ie size per account per float restrictions would restrict gaming to a large degree.... What is of particular interest is that firms such as GS, MS can game against their very client's positions.....They gave them the account, put on trades for them, know the prices they paid, and can trade against them.....This is definitely a legal form of insider trading that should be put on the table of extinction.....What would be truly amazing is how firms like GS would not make money with all their privy information..... One can hear it on Bloomberg already..... Wow firm A got long in company A at just the right time....and when everybody else was sitting at $25....hey these guys were at $50....Their symbol is xyz.......Bam ...the volume explodes by all the interest in the recent performance... Visibility, liquidity, and performance.....the name of the New Game....