Hedge Fund Group Warns Against Blanket Regulations

Jun 18 2009 | 9:44am ET

Not-for-profit industry group The Hedge Fund Association is responding favorably to U.S. President Barak Obama’s new financial plan, though the group warns that blanket regulations could stifle the fund management industry. 

"HFA applauds the Obama Administration and Congress for their efforts in financial system reform" states David Friedland, HFA president. "However, new hedge fund registration requirements aimed at all hedge funds, regardless of assets under management, would be unduly burdensome on smaller funds. This could have a significant negative impact on the hedge fund industry and U.S. economy.”

Friedland adds, “If the purpose of new regulation is to control and manage systemic risk, the HFA thinks U.S. lawmakers should focus regulation on firms with $250+ AUM, who represent 31.3% of all hedge funds and manage 95% of the $1.4 trillion in industry assets. Smaller firms may lack the resources to address additional oversight requirements, and represent almost no systemic risk to the financial markets.”
The group is, however, in favor of efforts to subject investment advisers to more rigorous examination and inspection. It also agrees with the proposal that would force funds to disclose data confidentially regarding size, leverage and other counterparty exposure.
"Given Obama's sweeping proposals issued earlier today, we expect several months or longer for the unintended consequences to begin to surface" added Ron Geffner, HFA director.  "Regulation of this magnitude should be done in stages."

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