Bloomberg – Don’t be misled by the recent news that a U.S. court blocked the Securities and Exchange Commission from regulating hedge funds.
The hot-as-a-pistol $1.2 trillion hedge fund business hasn’t permanently escaped the clutches of regulators. It has only postponed the inevitable.
As these fast-moving, risk-prone vehicles keep attracting a wider following, they present a higher and higher profile politically as well as financially and economically. In the words of the old jungle metaphor, the higher the monkey climbs the tree the more he exposes his rear.
The SEC’s plan mandating that hedge funds register with the agency and submit to random inspections was really quite a cautious step.
“It’s the mildest kind of regulation,” said Arthur Levitt Jr., a former SEC chairman and a director of Bloomberg LP, parent of Bloomberg News. “If there is a hedge fund scandal, and there probably will be some time in the future, Congress will step in with something much more draconian.”
Court decision or no court decision, scrutiny of hedge funds is increasing from all directions. Morningstar Inc., the Chicago-based mutual-fund and stock research firm, has started tracking investment results and fees at 3,000 of the estimated 8,000 hedge funds now in operation.
