So I was combing over my daily viewing of financial websites when I came across this:
Soros to End Career as Hedge Fund Manager
To save some of you time, the article talks about Soros returning money to outside investors and managing only family assets with his children assisting him. This is due to a new regulation that requires all hedge funds managing capital in excess of $150M to register with the SEC.
Now after the whole 2008 incident, I'm very much about regulating public companies that take big risks with investors money. However, I am very much against the regulation (and in this case, over regulation) of hedge funds. By registering with the SEC, hedge funds will be giving up privacy and allowing SEC members to come in at any point to check on things.
Am I the only one that sees this as the government prying into private information? The whole point of a hedge fund is to be unregulated so that it can purposely add more risk. Hedge funds aren't open to people with $50,000 or even $100,000. Most have a base requirement of AT LEAST $500,000-$1,000,000 and that's for the investor to decide whether or not the risk outweighs the reward. Who's to say that the SEC is full of good intentions? There's bad apples in any organization and by doing this, it just allows some corrupt person at the SEC to come into something like Paulson & Co. and reveal a strategy to another firm.
What's everyones thoughts on this?
It's a shame that he's closing it due to a hostile regulatory environment rather than issues like performance or retirement.
Reminds me of Atlas Shrugged...
I don't think it's fair to assume that those things aren't a factor, if not THE real factor. Druckenmiller bolted in 2000 and Quantum has been nothing special since, and Soros has made false-starts before this about either retiring, returning money, or running an "endowment-style" (read: lower return expectations) fund. Icahn threw the same sort of barbs about regulation being the reason for returning outside money, but now he's running a damned public company as an investment vehicle!
George is an old, old man who has a lot of distractions in his life, and frankly the fact that his sons are major shot-callers would be very uncomfortable to me as an investor.
For the final straw, a big deal was recently made of Soros being 75% cash. That tells me that the world's most famous macro investor is out of ideas.
haha, thank you for pointing this out
I don't see how any of the above would significantly impede hedge fund performance. Sure it will raise overhead costs, but at the end of the day, private funds can run basically any strategy they choose as long as they follow the proper disclosure requirements. The cost of having proper compliance procedures is a small portion of the fees the successful funds rake in.
Right but wasn't one of the driving points of having a hedge fund is not having to disclose anything? That's why whenever you hear about a fund going up big or losing big, it's a source and not a published document by their PR department. I just think it's an important staple in the HF industry that is being unnecessarily regulated.
I also agree with one of the above posters who said this reminds him of Atlas Shrugged.
I'm not sure what you mean by 'driving points'... do you mean an incentive to subscribe to a hedge fund or the incentive to start one? the former is largely a deep pocket's desire to allocate a portion of their funds to a risk-adjusted asset, the latter I assume is pay off. Either way, if you look at the Form ADV requirements, the stuff these funds have to report are very general. Basically the SEC is most concerned of systemic risk which can be best tracked by a fund's gross assets and its business relations with other firms. In terms of strategy, whether inter or intra firms, the stuff they have to disclose is very general (i.e. are you a HF? PE? VC?)
It's pretty funny that he even bothered managing $1 billion of outside money in the first place.
I would have been happier seeing the breakpoint being set at a billion or more, as opposed to $150MM. I'm not going to argue with the regulatory framework, largely because it's futile. But I really think that $150MM is too low and that this is aimed more at preventing so called "speculators" from exerting any real power in the marketplace.
The government does not want competetion
To add, the newly released rules seem well balanced to me. For example, there was one comment expressing concern for disclosing competitively sensitive information. The Commission responded by agreeing not to require firms to report net assets, report assets by categories, and report percentage owned by beneficial owners. Really, the only thing thats onerous about these regulations is that its a "pain in the ass", but in terms of investment strategy, I see little impediments.
If you are interested, here's the release, check out page 60ish for what I mentioned above. http://www.sec.gov/rules/final/2011/ia-3221.pdf
From what I remember from UG, investing is inherently risky. Risky meaning there is a chance of losing capital. I've always failed to understand why investors keep complaining about losing money from risky investments. If you don't want to lose money, go risk-free...otherwise quit crying. Boo regulation.
Many hedge funds will suffer from this regulation.. It could be the fall of the modern hedge fund. Too bad.
Lol this is overkill. The disclosures are not much, but they are a big pain in the ass. All of these disclosures are absolutely useless, though, and the government is just pushing paper for no reason. A $150M fund can't influence the market at all. Why have funds so small register and disclose at all? The only funds they should be caring about are $10+B, which are few. Yet another example of the government spending our money to hurt the economy...
I'd say that if the Feds are intent on increasing regulation, well that they let us advertise and accept non-accredited investors...fair's fair.
If its any solace, you do have to disclose if you have more than 1 billion in AUM. What's really stupid is that even if you fit under the
why not just have many little hedge funds you control all of those mini funds put money in a structured security called "flower structured derivative " it's a interval security based on time
on the first interval at a given time it releases money to the holder(main hedge fund) (flower opens)
second interval it returns the base value on security plus interest linked to main hedge fund performance based on a time after the second interval (flower closes)
third it returns what ever money plus interest and returns a fixed value of interest back to buyer(hedge fund)(flower reopens)
fourth it expires at a given time remaining money amount is given to charity; but since there is no money left after the main hedge fund gets there part (flower dies)
mad lawyer?
Registration requirements is determined by the adviser, not but the size of each individual fund. Therefore an entity that "controls" numerous funds or one master/feeder arrangement will have to register if they hit the 150 million threshold in the aggregate.
So is it illegal to open a bunch of funds with different people at the top, and communicating to each other before taking positions? Sorry if I'm not understanding exactly what you are saying.
lol ^^ investment banks should look into my idea
He deserves it. A man who has fought for socialism to build a metaphorical most around his wealth and personal interests at the expense of others finally has to comply with the bullshit he pushed for.
Cry me a fucking river.
Amen!
Oh hey I got a front page post! Thanks to whoever cleaned up the article too!
To the topic at hand (glad you found the opening statement funny, Happy) I think there are some valid points. But to whoever said something about it being just a disclosure of what kind of fund/firm they are, it's a bit more than that.
Additionally, the person who mentioned all investments are risky, this is true. But your not going to compare a mutual fund to a hedge fund as both have a very big difference in terms of risk (MF's being a bit risk averse).
Yeah there's a lot more you have to disclose, but in terms of strategy there's very little besides that. Hey, I completely sympathize, it sucks (I know cuz I'm working for an AM right now), even if you can get away with SEC registration you will likely have to register with the state.
You guys do realize that's 4% of assets right? I don't think he cares.
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