"i am always referring to intelligent regulation, for whatever that might mean exactly ..." *Intelligent regulation* They can start by doing the following: - Register the hedge fund. Record the name, principals, employees and the most basic information about the business. - Fingerprint and perform a basic background check on all employees and principals. - Require the hedge fund to appoint a Chief Compliance officer who maintains watch over the business and reports to the SEC. - Require the hedge fund to have a third party audit and supervise the accounting such as an accountant or attorney. - Require proper and uniform disclosure to all clients. I dont see how any of these most basic regulatory actions could do harm. I see where some crooks might want to hide their backgrounds or cook the books so they want to have the doors shut as tight as possible.
Most regulation leads to that famous law: The law of unintended consequences!! Would stock PE also be limited and regulated? Can only sell for a max of 50 times earnings? The Fed watches what the banks invest in and their risk management... commodities, especially oil and gas, are very dangerous for traders/speculators....listen to silly old dull interviews by Maria with Lee Raymond and see what he thinks of prices... Greenspan and most central bankers see no need to regulate "hedge funds"......risk is risk....he does not think there is enough "risk premium" in the market... Risk premium: how much MORE premium am I going to get for the risk I am taking? If you as a HF make me 8% that is only 3% more than I can get with a nice 5 year CD at the bank with NO RISK.....why do I need to risk my money for a 3% yield??? Sure, there are going to be some investors that get a big bloody nose.....and some will not be able to raise money again...just die on the vine... Barton Biggs book on Hedge Funds is an excellent read on the entire industry and the way it operates....believe me, they don't have all the answers...just because they are big does not mean they are smart!!! It only means they THINK they are smart, LOL... SteveD
it is impossible to do that for the whole capital of hedge funds without weaking these let's say twenty banks. and if it is not weakening them, then because they charge so much for the guarantee that the final investments make sense whatsoever. if you want to regulate hedge funds, you must regulate hedge funds. IMHO.
But if you were in stocks, then it is still beneficial - you would continue investing your excess income into the stocks at bargain prices, and you would be purchasing more stocks with your dividends too. You could also opportunistically allocate any cash savings you had into the bargain-basement stockmarket. Since it would be just a short-term market dislocation, the price in 3 years time would be identical whether there was a crash or not. So even if you did absolutely nothing, it would impact you not one bit.
Great - now only big institutions can enter the market, because no one-man start-up could ever afford the 6-7 figure compliance costs that this regime would impose. Result? Less competition, much talent would be barred from starting in the industry, thus an inferior selection of funds for investors to choose from. In classic bureaucratic style, you would actually be punishing the people you are supposed to be helping. And of course, none of the measures you propose would stop the Brian Hunters of this world from exercising their "trader's option" with other people's money. This is before we even touch on such quasi-fascist measures as actually fingerprinting people just because they want to become investment managers. What next, iris-scans for people posting stock recommendations on ET?
No; all it would add up for the majority of us is increased costs w/ no benefit. If blowups like Amarith are going to happen, they're going to happen regardless of if htere's regulation in place or not. If fraud is going to happen, it's going to happen regardless of regulation. Regulation would just be a cash cow that does nothing but suck the life out of the industry. It's like SOX - theoretically it's supposed to make company's accounting more transparent and more accountable - do you really think that if a CEO is goign to steal $100M that he's going to change his mind just because he has to sign off on a document now?
How about any fund when calling itself "Hedge Fund" must be Really/ Actually hedged constantly for the majority of risks; otherwise the fund operators should be criminally charged for not doing so, once finding out from monthly reporting/ auditing electronically?