Alternative Briefs

WASHINGTON — The SEC has posted new hedge fund regulations on its website, www.sec.gov, amending the 1940 Investment Advisers Act.

The new rules are not greatly changed from the draft version released this summer. Hedge fund management companies may not count a pooled fund as a single client and must adopt compliance policies, implement a compliance infrastructure, designate a chief compliance officer and provide certain disclosure documents.

However, hedge fund managers can market investment performance from periods prior to SEC registration, even if the firm does not have documentation to back up those numbers. Also, the criterion for accredited investors was raised to include those with a net worth of at least $1.5 million or an investment minimum of at least $750,000.

The only hedge fund management companies that are exempt from the requirements are those that qualify under the "private adviser exemption" (those that have fewer than 15 clients, do not hold themselves out to the public as an investment adviser, have a lock-up period shorter than two years, are not an adviser to a registered investment company and manage less than $25 million). All other hedge fund managers must register with the SEC by filing an ADV form and maintaining certain company records.

The SEC rejected public comment suggesting that registration would be duplicative for commodity pool operators, which are already registered with the Commodity Futures Trading Commission, and for managers of offshore hedge funds used by U.S. investors.

The final version of the regulations, effective Feb. 10, was approved by a 3-2 vote on Oct. 26 but was not released to the public until Dec. 2.

WESTPORT, Conn. — Pequot Capital Management, with $6.5 billion under management in health care and technology hedge funds, reached a preliminary agreement to acquire Willow Creek Capital Management, which runs $600 million in long-short small-cap hedge funds, confirmed Jonathan Gasthalter, a Pequot spokesman. He would not disclose terms but said the deal will likely close early next year.

The firm is expanding its investment strategy lineup in order to add multistrategy hedge fund management capabilities. New strategies being considered are credit funds, a distressed debt fund and a short-biased credit arbitrage fund. The acquisition of Willow Creek's small-cap fund and investment team is part of Pequot's expansion.

NEW YORK — Capital Z Investment Partners made an investment of an undisclosed size in BTN Partners, the new hedge fund shop set up by Joshua Feuerman, formerly head of global quantitative equities at Deutsche Asset Management. Mr. Feuerman started trading his U.S. quantitative long-short, market-neutral fund on Dec. 1 with $25 million. Capital Z specializes in financing next-generation hedge and private equity fund managers.

JACKSONVILLE, Fla. — Jacksonville General Employees' Pension Fund selected three finalists in its shortlist search for a core commingled real estate manager to run up to $80 million, said Camille Cossa, pension administrator. She said the board of the $1.6 billion fund will interview JPMorgan Fleming, UBS Realty Investors and RREEF at its January meeting, and select a manager at that time. The allocation will be the system's first real estate investment, and funding will probably come from reducing fixed income, Ms. Cossa said. No managers will be terminated.

Consultant Merrill Lynch assisted.

NEW YORK — Venture capital firms raised $3.2 billion in commitments to 19 new U.S. funds in the third quarter, up from $1.8 billion in the previous quarter and $1.3 billion in the third quarter 2003, according to a survey by Venture One. Two funds — Interwest IX with $600 million and Battery Ventures VII with $450 million — made up almost one-third of U.S. fund raising in the quarter ended Sept. 30.

Separately, the median U.S. venture capital fund is $155 million as of Sept. 30, compared with $100 million in 2003 and $76.7 million in 2002. Venture One fund medians omit funds smaller than $20 million.

LONDON — Platinum Capital Management launched the Platinum Portfolio, a multistrategy hedge fund of funds that combines six existing funds of funds: the Platinum Premier, All Weather, Turnberry, Washington, Dynasty and Equity Plus funds. The Platinum Portfolio includes strategies such as U.S. equity market neutral, U.S. relative value debt, interest rate arbitrage, and U.S. and China/Asia long-short equity. Back-testing this combination of managers in a variety of market conditions produced a 16.81% return in the eight years ended Sept. 30, according the a company statement.

DES MOINES, Iowa — The 10-year total rates of return for all real estate markets from 2005 to 2015 is expected to range from 7.5% to 9%, about 300 or 400 basis points lower than the previous decade, according to a new industry report. Retail property with grocery stores as anchor tenants are expected to generate the highest total returns among major property types over the next decade, the report noted. Due to high vacancy levels, industrial properties are expected to lag slightly behind other property types. The report, Expectations & Market Realities in Real Estate, is produced by Principal Real Estate Investors, Real Estate Research Corp. and Torto Wheaton Research.

MARBLEHEAD, Mass. — Hedge fund-of-funds manager Hardt Group invested an undisclosed amount in Tuckerbrook Alternative Investments, a boutique specializing in managing alternative investments for institutional clients. Hardt, which has $750 million in assets under management, will also be an investor in some of Tuckerbrook's investment strategies.