Hedge fund experts shrugged off the results of the Group of 20 meeting in London on April 2, saying the results were expected and manageable.
The G-20 industrialized and developing nations failed to deliver anything new in the way of regulations, despite widespread efforts to blame hedge funds for the global financial crisis. Instead, they adopted a vague guideline “to extend regulation and oversight to all systemically important financial institutions, instruments and markets (including), for the first time, systemically important hedge funds.”
Hedge fund experts say what's been proposed to date — manager registration and reporting portfolio data to regulators by large firms — won't be onerous.
“We know what lies ahead,” said Andrew Baker, CEO of the London-based hedge fund industry organization Alternative Investment Management Association. “It holds no great terrors for us.”
Fear is especially absent on the issue of registration, as all U.K. hedge fund managers are registered with the Financial Services Authority, and many large U.S. hedge funds are registered with the Securities and Exchange Commission.
Aoifinn Devitt, principal at alternatives consultant Clontarf Capital, London, said the key will be whether the SEC will have the resources to look into portfolios to understand what's there and have the “teeth” to enforce regulations. “Clearly these teeth were not in place up until now,” she said.
“The FSA has been regulating all U.K. hedge funds from day one,” agreed David Stewart, CEO of Odey Asset Management, London, which manages $4 billion in long-only multiasset and hedge fund strategies. “It's not clear to me that's what the SEC has done.”
Providing regulators with portfolio data also isn't much of a concern.
“I don't think hedge funds will resist transparency, provided they feel their competitors won't find out” the information submitted to regulators, Stephen Oxley, London-based managing director at Pacific Alternative Asset Management Co., said in an interview. “Confidentiality clearly will be a big part of that.” PAAMCO manages $9 billion in hedge funds of funds for institutional clients.
But Mr. Oxley said it's not clear whether regulators will know what to do with the information they receive from hedge funds.
“We have always insisted on position-level transparency from all our managers,” Mr. Oxley said in a follow-up e-mail. “Modeling and analyzing these data is a huge task requiring considerable resources and skills.”