The current issues regarding hedge funds simply points towards a third party being able to hide performance....and funds.... The solution is simple.... Each hedge fund and valuation must be visible real time during the market session....to be traded as a listed symbol....just like a stock.... The recent calamity of the WS firms was almost solely because of third tier assets and other assets which were not visible on an exchange..... A hedge fund = management.....when one invests in a hedge fund....one is buying management.... ................................................................................................... All hedge funds and mutual funds should trade like a stock....that anyone can buy that has a securities account.... Thus no more Madoffs....no more Lehmans....no more Bear Stearns type issues.....AIGs...MERs.....CITIs....etc.... Thus no more hidden accounting games.... ......................................................................................... Just make a simple rule....Hedge funds and mutuals funds must trade like a stock....and be made available to whoever has a securities account...... Mark to market of held instruments must be confirmed on the exchange as well..... The stock price ....must reflect the mark to market in real time.... Thus a hedge fund or mutual fund should only be allowed to trade instruments that trade on an exchange.....which would be reflected in their stock price....
If they traded like stocks, they would be closed end funds. Obviously, that's not the structure they want. "Lightly regulated" (yeah, right) hedge funds have not been the problem. Heavily regulated banks and I-banks turned out to be the problem. Wasn't the fabulous SEC & Fed supposed to protect everyone from events just like these? Rhetorical question. Now, they're going over-regulate hedge funds because they did such a great job with banks. If you're looking to avoid Madoffs by forcing hedge funds to be public companies (which, btw, you can't do), let me remind you that both WorldCom and Enron were publicly traded companies. Madoff was a huge political contributor. The politicians to whom he contributed probably kept the SEC off his back. All hail a mighty and powerful government!
Good points...... Enron etc...ran a business ....did not invest in stocks and bonds ...thereby professing management skills..... A hedge fund could be just a publicly traded fund that can go long or short....publicly traded investments.... A regular mutual fund could be a publicly traded fund that just goes long publicly traded investments.... ..................................................................................... Since both can only trade publicly traded investments....they cannot play Citibank, GS, MS , MER games which are publicly traded businesses that are allowed to hold assets that are not publicly traded..... The major issue in this last debacle lies within the third tier or non publicly traded instruments..... ........................................................................................ It is because of this ......that too many accounting games could be played....which in this case has basically cost the US its entire base of savings deposits.... A bank is a lot like a mine......it is called a mine....but one cannot prove what exactly is in the mine.... ........................................................................................... Furthermore the word "suitability" about not allowing just anyone to go long and short in a publicly traded fund really has to put into question....after the recent experience of supposed blue chip stocks going to $0..... ............................................................................................. The main point here being....visibility and accurate mark to market need to be vastly improved.... Banks should not be allowed excessive leverage....only heavily discounted loans etc....