Venture Capital Funds Fear Tighter Hedge Fund Regulation

by Philip Morton, Investors Offshore.com

16 June 2003

Venture capital and buyout funds are concerned that any new regulatory measures imposed on hedge funds could impact on them too, it was revealed last week.

Speaking to the Wall Street Journal, Mark Heesen, the president of the National Venture Capital Association observed that: 'We would certainly have to work very hard to make sure we were protected.'

He explained that venture capital funds are particularly concerned that changes in the minimum levels of investment required for loosely regulated vehicles such as hedge funds and venture capital funds could have an adverse impact on the industry. Although venture funds usually deal with institutional investors, according to Mr Heeson, the minimum requirement is sometimes waived for smaller investors who can contribute another element, such as expertise in a particular field, to the fund.

Restrictions on participation in such offerings could affect the industry's ability to bring such investors on board.

According to the WSJ, however, the Securities and Exchange Commission (SEC) is aware of the impact that raising the accredited investor standard could have, both for the hedge fund industry, and in the fields of venture capital and buyout funds.

The US business daily revealed that:

'Chairman William Donaldson said in a speech before the US Senate Banking Committee in April that the Commission would take this into account before deciding to adjust the standard to reflect increases in income levels and inflation since it was set in 1982.'

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