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July 16, 2004 at 08:00 PM
NEW YORK (HedgeWorld.com)–Fund managers and a high-ranking public pension officer presented senators with differing views on how best to avoid the twin dangers of too much or too little regulation for the hedge fund industry.
Speaking before the U.S. Senate Committee on Banking, Housing and Urban Affairs, CalPERS Investment Chief Mark Anson defended the Securities and Exchange Commission’s proposal to require managers with more than US$20 million in assets to register as investment advisers.
He said there are two advantages to registration: having managers provide uniform information about themselves and getting data to determine the total size of the hedge fund industry. But there must be a balance, he added. “Burdensome regulation could have two adverse consequences,” said Mr. Anson.
Excessive regulation might reduce the returns earned by hedge fund managers by restricting their investment strategy. In addition, managers may move their funds offshore, thereby reducing investment opportunities for U.S. investors.
The California Public Employees’ Retirement System, with US$165 billion in total assets, has allocated US$1 billion to its hedge fund program. Of this, about US$750 million has been invested with 16 managers over the past two years and now has a market value of US$877 million, said Mr. Anson. Nine of the 16 managers are registered investment advisers.
Creaky Regulation
Adam Cooper, chairman of the Managed Funds Association in Washington and senior managing director and general counsel of Chicago-based bond arbitrage manager Citadel Investment Group, said the current legal framework works extremely well. MFA opposes the SEC proposal.
