WASHINGTON (HedgeWorld.com)–Paul Roye may have given new momentum to a bandwagon when he told the Investment Company Institute’s annual gathering that current restrictions on mutual funds may unnecessarily constrain managers, prohibiting their use of some of the strategies associated with hedge funds.
Mr. Roye, director of the division of investment management for the Securities and Exchange Commission, made the usual disclaimer at the start of his May 23 presentation: his views are his own and not necessarily those of the SEC, its members or of his colleagues on the staff.
Furthermore, his remarks came only near the end of an address devoted chiefly to the ways in which he believes mutual funds ought to be “proactive” in regulating their own industry, through compliance programs and by monitoring conflicts of interests.
In addition to such self-regulation, Mr. Roye said, “the industry should be asking whether there are better ways to meet the investment needs of its shareholders. The division staff is also considering whether there may be benefits to expanding the kind of investment strategies that are offered to mutual fund investors (to include) certain market neutral strategies, which typically have been the province of hedge funds. As we all know, investors with a substantial portion of their portfolios in long equity funds have had a rough ride during the past three years.”
Despite the disclaimer and the apparent casualness of these words, Mr. Roye’s comments will draw attention coming as they did so soon after the May 14 and May 15 SEC roundtable on hedge funds . Chris Wloszczyna, a spokesman for the ICI, said that although the institute would be interested to learn of any more specific ideas, “we’d have to express caution about any changes to investor protection regulations that are in place.” Some observers have expressed disappointment that no unifying theme came out of the roundtable’s many discussions and perspective. Perhaps now a theme is developing retrospectively.