The new hedge fund law recently passed by the SEC may become a hurdle for smaller hedge funds. The new law may freeze smaller hedge fund managers out of the boom in the hedge fund asset management,according to senior hedge fund industry executive. Sandra Manzke, co-chairman and co-chief executive officer of Tremont Global Advisors. Manske said, � the cost of implementing such compliancerequirements will make it harder for smaller hedge fund managers to fully carry out such requirements.�

Manzke told the ICBI conference such burden may prove difficult for smaller managers to set up. She said, “I have three words: compliance, compliance, compliance. The cost of compliance is becoming quite substantial and this is going to be a big barrier to entry�. She further explained that the new provisions of the U.S. Sarbanes-Oxley company accounting rules, the financial provisions of the U.S. Patriot Act and the new hedge fund registration requirements of the U.S. Securities and Exchange Commission (SEC) has become a huge compliance burden for smaller hedge fund managers.

The new SEC hedge fund laws may reduce fears among pension fund managers entering into the hedge fund investment arena, on one hand, but it will also likely make it more difficult for smaller hedge funds to benefit from the anticipated asset inflows coming from the institutional pension fund managers. New data from Bank of New York and consultants Casey, Quirk & Acito suggests that new assets coming from pension fund managers will likely grow from current $60 billion to about $300 billion during the next five years.

Manzke also spoke about the hedge fund capacity issues; she said, �There is tons of capacity in long/short equity funds and in other areas,” Manzke however acknowledged that there was a shortage of highly talented managers to manage the big pools of money flowing into the hedge fund sector. According to her, if funds perform poorly in future due to a lack of good talent, investors in such fund may simply look elsewhere.

Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net

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