SEC To Consider Further Hedge Fund Regulation

May 2, 2006 ( - Securities and Exchange Commission chairman Christopher Cox said Monday the regulator plans in the next 9 to 12 months to decide whether to impose more regulations on the hedge fund industry.

A MarketWatch report noted that the regulator earlier this year required hedge funds to register as investment advisers (See SEC Imposes Hedge Fund Registration )and provide regulators with basic information about themselves in an effort to reign in on funds using strategies considered to be riskier than others.

The SEC expects over the coming year to “be able to internalize the information” it has collected, Cox said, according to MarketWatch.

Hedge funds have grown from being private investment partnerships for the ultra-wealthy into an industry that is increasingly reaching a variety of investors either indirectly through pension funds or via retail products such as mutual funds that use hedging strategies. One recent study shows that more than 80% of investors are becoming more comfortable with the funds. (See Institutional Investors Increasing Hedge Fund and PE Allocations ). Some ailing pension funds, like New Jersey’s public employee fund, have even turned to hedge funds to try to cushion steep deficits (See NJ Turns to Hedge Funds to Overcome Pension Deficit) .

Hedge fund assets grew $121 billion in the last year to $1.12 trillion, according to estimates by Hennessee Group LLC (See Hedge Funds Continue Growth in 2005 ).

The SEC’s hedge fund regulations have been controversial since Cox’s predecessor William Donaldson first proposed them more than two years ago, according to MarketWatch. Last year, two of the five SEC commissioners voted against them and many in the industry complained that registration was just the first step towards more regulation.