Hedge Funds Continue to Deregister

Hedge fund advisors continue to deregister from the SEC. During the past year, 732 hedge fund advisors (firms that advise at least one fund) have deregistered, according to the Investment Adviser Association (IAA) and National Regulatory Services (NRS) seventh annual report, Evolution/Revolution, which profiles the advisor profession.

The Goldstein ruling invalidating the SEC’s hedge fund registration requirement is no doubt the reason why hedge fund advisors continue to dump their registration. However, the report notes that 1,990 hedge fund advisors remain registered, including 1,421 “specialist” hedge fund advisory firms, which say that more than 75% of their clients consist of hedge funds or other pooled investment vehicles. The large number of advisors terminating their registrations “needs to be viewed in the larger context of the growing number of hedge fund advisers that have voluntarily chosen to register under the Advisers Act,” notes David Tittsworth, executive director of IAA, in a prepared statement. “It is striking to consider that there were only 329 firms that primarily advise hedge funds registered with the SEC in 2001 and that today there are 1,421. I think it is likely that the trend favoring voluntary SEC registration with continue.