WASHINGTON (HedgeWorld.com)–Federal Reserve Chairman Alan Greenspan said he opposes a proposed requirement that hedge fund managers register as investment advisers with the Securities and Exchange Commission.

Testifying before the Senate Committee on Banking, Housing and Urban Affairs Feb. 12, Mr. Greenspan said he did not agree with the SEC’s plan. In response to a question from committee chairman Sen. Richard C. Shelby (R-Ala.) Mr. Greenspan said, “I grant you that registration is not a problem in and of itself. The question is what is the purpose of that, unless you’re going to go further” with regulation.

He said that hedge funds offer tremendous value to the financial system by providing liquidity, despite their reputation for being “peculiar,” and implied that requiring them to register could reduce their effectiveness. “The value that [hedge funds] have is to create very significant amounts of liquidity in our system,” he said.

He added, though, that he thinks hedge funds should remain as vehicles for just the wealthy, and not for those of moderate or lower incomes.

PBarr@HedgeWorld.com