A proposal under consideration by the California Corporations Comm-issioner that would require registration by hedge funds is having a hard time finding supporters.
The Commissioner’s proposal would mandate the registration of nearly every investment advisor doing business in the state. The sole exceptions would be those advisors that strictly limit themselves to providing investment advice to venture capital clients or entities. The proposal has drawn several comments since it was first promulgated. Not surprisingly, though, none of those comments favor it as it currently stands.
Many of the comments come from advisors who agree in principle that hedge funds should be required to register but who say, in effect, that their own operations are not hedge funds and so the proposal should be re-written to exclude them.
The first comment the Corporations Department received on this subject was precisely of that sort. Craig Ehlenberger, the principal of Abalone Cove Advisors, wrote, “I certainly recognize and share the concerns related to the unregulated hedge fund industry, and completely agree such entities require some kind of oversight to protect those who may unwittingly invest inappropriately in these funds.”
But Abalone Cove Advisors, he wrote, shouldn’t become enmeshed in that web, since his clients are primarily California counties and other cash management institutions that invest entirely within the fixed income/debt markets.