Most US Hedge Funds Already Registered With SEC

by Phillip Morton, Investors Offshore.com

04 February 2009

With legislators in the United States and elsewhere clamouring for tighter regulation on the free-wheeling world of hedge funds in the wake of the financial crisis and the Bernard L. Madoff scandal, a new study has found that over half of US hedge funds are in fact already registered with the Securities and Exchange Commission.

The study, released by Chicago-based Hedge Fund Research on February 2, shows that nearly 55% of hedge fund firms located in the United States are currently registered with the SEC. Together, these registered firms manage almost 71% of all US-based global hedge fund capital.

The study also found that SEC-registered firms manage well over half (60%) of the USD1.4 trillion in global hedge fund assets. Furthermore, two-thirds of the capital managed by funds of hedge funds is managed by SEC-registered firms.

The findings of HFR's research was released just days after US Senators Chuck Grassley and Carl Levin introduced the Hedge Fund Transparency Act of 2009, which they say will no longer permit hedge funds to operate under a "cloak of secrecy."

The aim of the legislation is to clarify the Investment Company Act of 1940 to remove any doubt that SEC has the authority to require hedge funds to register.

“A major cause of the current crisis is a lack of transparency," commented Grassley, an Iowa Republican, upon the bill's introduction into the Senate. "The wizards on Wall Street figured out a million clever ways to avoid the transparency sought by the securities regulations adopted during the 1930s," he remarked.

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