My opinion is that hedge funds should be regulated more heavily then mutual funds. The reasoning I give is simple. The strategies employed by the hedge funds are far more riskier then a mutual fund. I have not heard of one mutual fund ever "blowing up". In addition, hedge funds seem to attract a bunch of crooks. Sorry if I am being a little bit rough in that assertion, but there have been too many headlines where the hedge fund managers liquidate and head for the hills never to be heard from again. Correct me here if I am wrong on this point. There are some bad mutual funds out there, but I never see headlines all over the news about their blowups or crooks cashing out the fund and running for Sweden.
When a hedge fund "blows up", wealthy people are "hurt" by it, not widows and orphans. Nobody will feel any sympathy for those losers. Legislation won't improve performance either.
They seem to do a good job regulating themselves. Jungle takes care of their own. John http://biz.yahoo.com/ap/060930/amaranth_losses.html?.v=2
No. Average people should be protected from excessive risk and fraudulent operators... but Rich, sophisticated businessmen and market professionals should have the right to invest in an unregulated space.
I think the LTCM debacle indicates the need for some oversight. LTCM almost brought down the financial markets with it because of its size. I think hedge fund investors can fend for themselves. It's us non-investors I am concerned about.
"When a hedge fund "blows up", wealthy people are "hurt" by it, not widows and orphans." That may have been true 10 years ago, but it is not true today. Large institutions, pension funds, and other similiar entities are now trusting their money with hedge funds. Need I remind you of Nick Leeson. He took out an entire bank on his own because of his unsupervised activities. Did that only hurt the wealthy people? There were a lot of people left unemployed and out of work after Mr. Leeson's activities. http://en.wikipedia.org/wiki/Nick_Leeson "They seem to do a good job regulating themselves." This statement is simply laughable. When has a financial organization ever done a good job at regulating themselves? When it comes to money, I wouldnt trust anyone with the job of regulating themselves. "Average people should be protected from excessive risk and fraudulent operators... but Rich, sophisticated businessmen and market professionals should have the right to invest in an unregulated space." The definition of an accredited investor is at least one of the following: 1) earn an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income. 2) have a net worth exceeding $1 million, either individually or jointly with his or her spouse. 3) be a general partner, executive officer, director or a related combination thereof for the issuer of a security being offered. Here are some examples of accredited investors by the above definition: - A wife of a victim from 9/11 who receives $2 million as a settlement from the tragedy. - A General Motors factory worker who had maxed out his IRA and other investments over the years. Along with his house that is now worth $500,000 (He purchased it for 75000 in the 80s) he is now worth 1.2 million at the age of 60 years old. - A 23 year old male who inherited 1.1 million dollars from the death of his father. Clearly, these people are not sophisticated businessmen and/or market professionals. In fact, the sophisticated businessmen and market professionals do need protection. Do you think Citibank or the San Diego Pension fund would now agree that Amaranth should be an unregulated entity? When I get on the freeway, its amazing how most people set the cruise control at 55. The State Police have done a great job in making sure those that go over the speed limit are ticketed. In the same way, the SEC should do the same job. Put it into people's heads that if they do wrong with other people's cash that someone is going to get a ticket or go to jail. When hedge fund managers start going to jails then I believe we will see a marked change in attitudes and behavior.
Investors, pension fund managers etc., need to be made aware of the risks of various kinds of investing. More education on investing is needed. Not one word about it was mentioned while I was in school. Some experts say to invest no more than 4% of your capital in any one stock, hedge fund or other high risk area. Can't get hurt if you lose some or all of that 4%.
Well instead of running around trying to regulate hedge funds, its the investment managers of pension funds that need to be looked after. The industry itself will (and is) become increasingly transparent as investors (institutions particularly) demand more access and oversight into their investment.
Well i hate to be the bearer of bad news for Mutual Fund investors but you can better believe i have read ramblings about where Mutual Funds are clamoring for less and less regulation. You can be assured the fat cats in the industry want LESS and LESS regulation, especially as they see more and more $$$ going to Hedge Funds. How long is it going to be before EVERY Mutual Fund will be able to act like Hedge funds? What is wall streets real concern, yours or theirs? Do not answer that . Bottom line, Mutual Funds want to play short side also, and much more. LOL PS, do not yell at me, do not ask where i read this, do not think i am crazy. Besides i hardly ever follow up on posts. Rambling contests are not my bag, i just try to speak truths. Thank You
"Well instead of running around trying to regulate hedge funds, its the investment managers of pension funds that need to be looked after." The biggest problem in the investment industry is that everyone knows each other. Deals are made and people are hired through friends and not on the basis of what is right or logical. I can bet that the top manager at Amaranth probably was good friends with the person who managed the San Diego Pension fund. I believe this is why independent oversight boards are mandated for the mutual funds. I believe at least the following should be placed over some of the larger hedge funds: - registration of all employees to include taking a test, fingerprinting, background checks, etc., just like the brokers or financial advisors, register everyone from the prinicipals to the lowly assistants and analysts. - Chief Compliance officer - independent oversight board of at least 3 persons - accounting monitored and audited by an outside accounting firm or attorney - better disclosure to clients of holdings and a pricing system established so clients can properly value their holdings at the firms - specific legislation established holding the hedge fund manager and/or trader criminally responsible for certain actions - give the SEC the power to ban certain persons from the hedge fund industry altogether for certain actions