If you’re working for a hedge fund, be advised. D-Day, or March 30, is fast approaching for funds to register with the U.S. Securities and Exchange Commission, courtesy of Dodd-Frank. And, with this new oversight, expect some substantial shakeups. As the once murky and secretive world of hedge funds becomes much more transparent, predictions are that a number of players will choose to go the way of the dodo.
There are exemptions under the SEC ruling for certain “private fund advisers.” According to the SEC, advisers solely to venture capital funds, advisers solely to private funds with less than $150 million in assets under management in the U.S. and certain foreign advisers without a place of business in the U.S. needn’t comply with the ruling.
For those left to face scrutiny, the next step could just be to put up, shut down or reshape yourself. CNBC is reporting $15 billion Moore Capital Management may just become a “family office” and move away from outside investors, according to sources. The news report also notes that one investor believed that Moore Capital Management founder Louis Moore Bacon considered Dodd-Frank Act as “a problem.”
The industry is also facing continuing pressure from market conditions and poor performance. So, don’t expect investor money to continue to flock their way. In Pensions & Investments' annual survey of the 200 largest defined benefit plans, their new investment in hedge funds has all but dried up. According to the survey, hedge funds had the slowest growth of all other investments by the top retirement plans—up just 2 percent to $111.9 billion for the 12 months ended September 30, 2011. Real estate equity investment by the top retirement plans jumped 26 percent, while private equity investment increased 16 percent. Venture capital investment grew 26 percent, and buyouts climbed 15 percent. Commodities grew 13 percent, and infrastructure jumped 25 percent.
According to the Hennessee Hedge Fund Index, hedge funds advanced a meager 2.51 percent in January. Bloomberg’s estimates are even more disappointing, noting a gain of just 0.2 percent in January. While financial news has certainly turned from the large losses in 2011, the news is still pretty poor. In comparison, the S&P 500 advanced 4.36 percent in January, while the Dow Jones Industrial Average increased 3.40 percent and the NASDAQ Composite Index jumped 8.01 percent. According to the Hennessee Hedge Fund Index, hedge funds declined 4.6 percent in 2011. Bloomberg reported a drop of 4.9 percent in 2011.