U.S. Senator Richard Shelby (R-Ala) accused billionaire businessman George Soros of hypocrisy for avoiding new regulations by turning his $25 billion hedge fund shop into a family office and returning outside money.
Fox News quotes Shelby as saying in a statement: “It appears that Mr. Soros talked up financial reform only to sell it short. Don't be surprised to see his fellow Wall Street financiers follow suit.”
By returning outsider money (which represents only a small portion of the money he manages) Soros qualifies for an exemption under the Dodd-Frank Act, allowing him to avoid registering and turning over confidential information to the Securities and Exchange Commission.
According to research from Infovest21, other managers may follow suit: the research company’s just-released manager sentiment indicator found 56% of the 40 managers it surveyed expect more hedge fund managers to follow Soros’ lead, returning client assets and running family offices.
Under the Dodd-Frank Act, hedge fund managers will be expected to register in March 2012. Managers polled by Infovest21 said the family office option could make sense, citing increased oversight by the SEC, FINRA, CFTC, individual states, labor laws, department of revenue as well as complicated tax issues and the waiver of carried interest.
Managers said those most likely to follow Soros were those doing foreign exchange trading and those who’ve been very successful. Said one manager, “Once you've achieve that much success clients become more of a headache than a benefit.”
Lois Peltz, president of Infovest21, said: “Of those 44% who do not expect more hedge fund managers to follow, a number highlighted that Soros was 80 years old and may have wanted to leave the business. Others said that only 4% of Soros' funds were non-family assets and so it made sense economically and it was a special case. Another manager pointed out that few hedge fund managers have billions of dollars of their own to run as a family office.”