WEST PALM BEACH, FL (HEDGECO.NET) – Derek Stewart, director of U.K.-based fund of hedge funds manager Mellon Global Alternative Investments, said that the proposed hedge fund regulations by the USSEC could help to weed out bad hedge fund companies without interfering with the choices of hedge fund of fund managers.
Fund of hedge funds have become a popular choice for many managers who are drawn to it because of the opportunity such funds offer in the area of risk reduction. By investing in a wide variety of managers using diverse trading strategies, investment risks are evenly spread in the process.
Mr. Stewart thinks this regulation by the SEC may actually bring good things, on condition that it does not interfere with flexibility, or by placing restrictions on manager�s ability to engage in shorting strategies. Shorting strategies are employed by managers to profit from declining markets by selling short companies that they deem vulnerable.
Stewart said, “Quite a few of the hedge-fund managers we use are already registered with the SEC — you have to be to take money from certain retirement schemes and pension funds — and registration boosts a fund’s rating with us,” according to him.
He also added, “If hedge-fund managers have insufficient resources to meet compliance then that’s already a risk, if regulation raises standards and weeds out the tiny fraction of fraudulent vehicles without ruining it for the rest, that must be a good thing,” Stewart explained.
Relatively speaking, European hedge funds are more regulated in comparative terms with the US based hedge funds. There is some skepticism however, that regulating hedge funds in the United States would not change much in light of SEC manpower shortfalls, as the agency is understaffed to the point that it has not adequately supervised Wall Street.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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