Why Hedge Fund Regulation is All About Alpha
| Jan 28th, 2007 | Filed under: Hedge Fund Industry Trends | By: Alpha Male |
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Alpha-centric investing refers to more than just portable alpha. As we have reported on this blog, it encapsulates new operational infrastructures (UMAs), new fee arrangements (performance fees with benchmark hurdles / fee-per-alpha), new metrics (ranking funds based on alpha instead of absolute returns), new organizational structures (small teams of alpha producers), and new advisory models (fee-based vs. commission-based). A recent investment newsletter highlights another domain that is impacted by this simple idea: regulation.
In his January 26th weekly newsletter Accredited Investor author John Mauldin covers the SEC’s proposed new hedge fund investment eligibility rules (which, as an aside, come attached to new anti-fraud provisions that confirm it is still illegal to break the law).
Background
Currently the minimum total net worth required to invest in private offerings such as hedge funds in the United States is $1 million. (Spent everything but still have a great job? No worries as long as your income is (individually) $200,000 or (with spouse) $300,000). Collectively, these individuals are known as accredited investors.
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[...] Looks like John Mauldin’s call to arms against the new SEC hedge fund rule is working. Individual investors are livid since, in many cases, they will no longer be allowed to invest in their favorite hedge funds. But are we all playing right into the SEC’s hands? [...]