The original investigation, launched in May 2002, was initiated to look into how hedge funds are valued.
However, the proliferation of “fund of hedge funds” – alternative investments that pool the money of average investors allowing access to the hedge fund market – has given cause for speculation into their value as well.
Because the average investor now has more access to the volatile hedge fund market, the SEC wants to ensure that these “fund of hedge funds” are valuing their investments correctly, and passing the correct valuation on when determining the fund’s overall value.
With the downturn of the market over the past few years; the $550 billion hedge fund industry has suffered as well. According to New York consultants, Hennessee Group, the average hedge fund has lost more than 5% year-to-date.
The SEC did not provide a target date for the publication of results from this investigation.