By Judith Burns Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Hedge fund managers have a new bet: that the lightly regulated industry will face increased oversight once Barack Obama becomes president.
About 98% of senior hedge fund managers surveyed after last week's election said they expect tighter regulation under an Obama administration, and nearly 84% think rising compliance costs will make hedge funds more costly to operate. Fewer than 10% said they expect cost hikes to be passed on to hedge-fund investors, though.
"The election's focus on the economy left many with the impression that regulatory reform will be a priority for the new regime," Howard Altman, a co-managing principal at Rothstein Kass, said in a statement." While the scope of these efforts is not yet defined, it is apparent that the hedge fund industry believes that regulatory action is on the horizon."
Rothstein Kass, a New Jersey financial services firm, sponsored the survey of 313 managing partners at hedge funds, which was conducted by telephone earlier this week.
While a majority of those surveyed anticipate that the Obama administration will have a negative effect on the hedge fund industry, fewer than 6% think it will cause funds to close up shop or crimp start-ups, and fewer than 10% expect that it would prevent hedge funds from becoming public companies. Hedge fund managers split over whether increased regulation would make it harder for hedge funds to raise capital; with more than half of larger hedge fund managers expecting so, compared to 41% of managers of smaller funds - defined as those with less than $750 million of assets.
Hedge funds, which pool investments by wealthy individuals and institutional investors, have proliferated in recent years while escaping close regulatory scrutiny. A controversial rule pushed by former Securities and Exchange Commission chairman William Donaldson to regulate hedge fund advisors was tossed out by a federal court in 2006, leaving many funds operating without routine federal inspections.
Calls for stricter oversight haven't disappeared, particularly from those who say the hedge fund industry is so large that it poses risks for markets and ordinary investors. Hedge fund managers are bracing for new regulation, according to Rothstein Kass, with more than three-quarters of those surveyed anticipating increased scrutiny of fees, asset valuation, counterparty risks, capital raising and disclosure.
A majority of the hedge fund managers who took part in the survey expect stepped-up regulation of borrowing limits, but less than one-third expect regulation to target hedge funds' investment strategies.
The survey results were released on the eve of a hearing Thursday by the House Government Oversight and Reform Committee. Witnesses include some top-performing hedge fund managers, such as Citadel Investment Group Chief Executive and President Kenneth Griffin, Harbinger Capital Partners Senior Managing Partner Philip Falcone, Paulson & Co. Inc. President John Alfred Paulson, Renaissance Technologies President James Simons and Soros Fund Management Chairman George Soros. Former SEC chairman David Ruder, now a Northwestern University Law School professor, and other academics, also are slated to testify to the House panel.
-By Judith Burns, Dow Jones Newswires, 202-862-6692; Judith.Burns@dowjones.com
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(END) Dow Jones Newswires
November 12, 2008 17:46 ET (22:46 GMT)

Publié le 12 novembre 2008 Copyright © 2008 Dowjones