Like many growth industries that go a-courting in Congress, hedge funds have approached legislative and regulatory hurdles with lobbyists retained and pocketbooks open.
As hedge funds continue to attract a broader class of investors, however, they are discovering that educating lawmakers  overcoming one Securities and Exchange Commission (SEC) member’s recent admission that “there is no clear definition of what a hedge fund is† can be even harder than playing the markets.
Most hedge funds begin as a pool of rich investors who use their combined wealth to play off falling stocks and securities with “short sells†and other risky trading moves. But one company, Cerberus Capital Management, is more than just a hedge fund.
Cerberus controls the Alamo and National car-rental chains and Albertson’s supermarkets and recently led a group that purchased GMAC, the profitable loan-financing arm of General Motors. When WorldCom went bust in 2003, Cerberus owned so much of its debt that one of the fund’s notoriously private executives testified before the Senate Judiciary Committee.
In late 2003, when the SEC began moving toward requiring all hedge-fund advisers to register with the agency, Cerberus and other previously unregulated hedges began fearing harsher new rules to come. In the Senate, independent-minded Banking Committee Chairman Richard Shelby (R-Ala.) had publicly criticized hedge funds’ role in misbehavior by mutual funds
