Hedge Fund Regulation

The ‘Knowledgeable Employee’ No-Action Letter

Mar 5th, 2014 | Filed under: Hedge Fund Regulation, Today's Post

The SEC says that it does not believe that “merely” providing analysis or information to the active members of a policy-making committee within a fund management firm is the same thing as making policy for the firm. That seems likely to provoke some wonderful hair-splitting disputes going forward.


Depositary-lite and the challenge of implementation

Mar 3rd, 2014 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Regulatory, Today's Post

AIFMD brings many changes to the table. Grant Thornton Ireland has issued a new paper looking at the ramifications.


EU Tax Guru: FTT Rethink Underway

Jan 8th, 2014 | Filed under: Currencies, Derivatives, Hedge Fund Regulation, Today's Post

In January 2013 the Council of the European Union agreed to allow 11 member states to institute a sweeping financial transaction tax as a matter of "enhanced cooperation." Now, a year later, the EU's tax commissioner, a one-time enthusiast of the idea, is signaling compromise.


The Cayman Islands’ New Fund Governance System

Dec 12th, 2013 | Filed under: Alpha Strategies, Hedge Fund Industry Trends, Hedge Fund Regulation, Today's Post

Ogier Partner Peter Cockhill recently examined the direction in which the Cayman Islands regulator CIMA is headed on fund governance. He thinks the costs of the new framework, though real, will prove reasonable given the benefits.


AIMA Survey, Interviews: On Regulatory Costs

Oct 27th, 2013 | Filed under: Hedge Fund Regulation, Regulatory, Today's Post

Managers broadly are of the view that the more complex a regulation, the more expensive it is for those affected. The regulations that concern them the most in this respect are: FATCA and AIFMD.


State Street: Bad News for FpML is Good News for Markets

Aug 12th, 2013 | Filed under: Derivatives, Hedge Fund Regulation, Regulatory, Today's Post

Buried in the midst of a wide-ranging report, we have found the news that the old-fashioned FIX protocol is still a vital force, unlikely to be replaced by the flashier open-source FpML.


Bondholder v. Sovereign: An Empirical Analysis

Jan 9th, 2013 | Filed under: Hedge Fund Regulation, Today's Post

In 1992 the Supreme Court ruled that the issuance of bonds is itself a commercial activity, thus bond defaults by sovereigns are clearly subject to litigation in U.S. courts. One of the more intuitive findings of the authors of a new empirical study of such lawsuits is that the identity of the characteristic plaintiffs has changed over time.


Hedge Funds and Their World: Slow Recovery Ahead

Sep 25th, 2012 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Today's Post

Markets are bullish on the United States in particular, though this is so only with some obvious qualifications: they don’t expect that a go-go climate will return any time soon, but they do expect a slow-and-real recovery. Likewise, markets are modestly bullish on at least the north of Europe.


Dear SEC: Comments on the JOBS Act

Jul 19th, 2012 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Private Equity, Real Estate, Regulatory, Today's Post

A veteran of hedge funds and private equity, Jeff Joseph offers some comments to the U.S. Securities and Exchange Commission on the JOBS Act and what this legislation has the potential to mean to the global alternative investment community.


Sound Alternatives Practices in the Great White North

May 29th, 2012 | Filed under: Best Practices, Hedge Fund Regulation, Today's Post

The meat of the guide addresses what AIMA Canada considers sound practice in marketing and promotion, such as in the calculation and presentation of returns, in selecting a benchmark relevant to a specific strategy, and in explaining the various ratios used for the same purpose. It notes that the Association for Investment Management and Research’s Performance Presentation Standards (AIMR-PPS) recommend using a time-weighted method for the calculation of returns, a model otherwise known as the Modified Dietz method.


Simplifying the JOBS Act for Alternative Investment Vehicles

May 10th, 2012 | Filed under: Hedge Fund Regulation, Today's Post

By Ron S. Geffner, Partner, Head of Financial Services, Sadis & Goldberg LLP On April 5, 2012, President Obama signed the Jumpstart Our Business Startups Act, H.R. 3606 (“JOBS Act“). The JOBS Act requires the Securities & Exchange Commission (“SEC“) to revise existing rules to implement many of the provisions of the JOBS Act. This [...]


The Brand of Hedge Funds

Apr 26th, 2012 | Filed under: Alpha Strategies, Hedge Fund Industry Trends, Hedge Fund Operations and Risk Management, Hedge Fund Regulation, Today's Post

"This industry will perhaps never really shake off the aura of secrecy and inevitable rumor mill, but investors and risk managers need to really start to judge funds on the metric against which the funds judge themselves: performance."


A Battle Cry for Hedge Funds—Separate but not Equal

Apr 12th, 2012 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Today's Post

Diane Harrison examines the state of the hedge fund industry and regulation.


Catastrophism Versus Darwinism: Dodd-Frank as Climate Change

Mar 14th, 2012 | Filed under: Alpha Strategies, Commodities, CTA, Hedge Fund Industry Trends, Hedge Fund Regulation, Hedge Fund Strategies, Private Equity, Retail Investing, Today's Post

The Grant Thornton paper maintains that the asset management industry achieved "performance and operational efficiencies" during 2011, and this sounds like the sort of marginal adaptation that play a large part in Charles Darwins' writings, to which GT's Winstoin Wilson alluded. But ... the report also treats the regulatory environment as a meteor, capable of wiping out even the best-adapted of pre-collision dinosaurs. So "the Darwinian process" is an odd label for what it describes.


Algo Trading: Life in the Cross-Hairs

Mar 8th, 2012 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Regulation, Today's Post

Three lawyers with Covington & Burlington write about the new intensified scrutiny to which regulators are subjecting algorihtmic and high frequency trading. They place it in the context of an old dispute over what constitutes market manipulation. According to the broadest view, if a trader's 'sole intent' in making even a quite ordinary buy or sell order is to move the price, then the resulting trade is market manipulation.


Final CFTC Rule Limits Registration Exemptions for Commodity Pools

Mar 6th, 2012 | Filed under: Commodities, CTA, Hedge Fund Regulation, Today's Post

With the enactment of the Dodd-Frank Act (more formally the Wall Street Reform and Consumer Protection Act) in 2010, Congress demanded change. It did not specifically demand changes in the rules relating to CPOs, but it did demand that the SEC change certain rules regarding hedge fund advisors, and the CFTC has decided that a reconsideration of the CPO rules is “consistent with the tenor of the provisions” of that act because the “sources of risk delineated in the Dodd-Frank Act with respect to private funds are also presented by commodity pools.”


AIMA Takes Aim at FTT Proposal

Jan 18th, 2012 | Filed under: Commodities, Hedge Fund Industry Trends, Hedge Fund Regulation, Today's Post

AIMA, in a report sharply critical of the proposed European Union financial transaction tax, sets out the way in which the tax could burden businesses, and their consumers, to a degree far greater than the proponents contend. After all, any single product may pass through several stages between raw materials and final consumer, as there are several steps between farmer harvesting wheat and retail outlet, such as Tesco, selling pasta. Businesses at every stop along the way (farmers, wheat processers, pasta extruders) will naturally want to hedge their own operational risks in the financial markets, so the price of the finished product will reflect the repeated imposition of the FTT.


Commodities: Position Limits and Arbitrage Possibilities

Oct 30th, 2011 | Filed under: Commodities, CTA, Hedge Fund Regulation, Today's Post

There is an old story often attributed to economist Burton Malkiel. A professor of finance and an undergraduate are walking together. They see what looks like a $100 bill lying on the sidewalk. The naïve student bends down to pick it up, but the professor says, “Don’t bother. If it were a real bill, it [...]


WMI Reorganization Produces Potentially Disruptive Bankruptcy Decision

Oct 19th, 2011 | Filed under: Hedge Fund Regulation, Today's Post

The explosion of the subprime market may yet produce a significant change in the way investors and their managers with a distressed-assets strategy maneuver for advantage in the context of Chapter 11 proceedings


Fine Print As Yet Unwritten, But the Gist is Clear for OTC Derivatives

Oct 4th, 2011 | Filed under: Alpha Strategies, Hedge Fund Industry Trends, Hedge Fund Operations and Risk Management, Hedge Fund Regulation, Today's Post

Clearing within ten days after the transaction (T+10) was once the norm, though it now seems archaic. Clearing overnight or in a once-a-day cycle will in the years ahead become equally unsatisfactory. It may soon “become standard practice for risk managers and eventually traders to demand proof that their trades have been cleared mere seconds after execution.”


Will the Babble of Many Taxes Scupper Hopes for Merger Mania and Cost Cutting under UCITS 4?

Aug 30th, 2011 | Filed under: Hedge Fund Industry Trends, Hedge Fund Operations and Risk Management, Hedge Fund Regulation, Investment Management Fees, Today's Post

There are high hopes that the new UCITS framework that took effect in July could herald rationalisation amongst Europe’s regulated hedge funds. While tax factors could slow down the process, UCITS has plenty of other growth drivers besides cost savings.


Court Decision May Muddy Activist Alpha Seekers’ Strategies

Aug 1st, 2011 | Filed under: Hedge Fund Regulation, Performance, Analytics & Metrics, Today's Post

As if there wasn't enough confusion in the roiling U.S. capital markets and regulatory environment, the U.S. Second Circuit Court has issued a decision that will make alpha that more elusive for hedge funds involved in shareholder activism.


Learning to swim in alpha-bet soup

Jun 14th, 2011 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Institutional Investing, Today's Post

There's nothing like a good list of acronyms to confuse even the most immersed hedge fund aficionado. A new report by KPMG and RBC Dexia unintentionally takes the industry's affinity for acronyms up a notch.


Study finds “tantalizing insight into how hedge funds funds generate alpha.” And it’s not how you think…

May 26th, 2011 | Filed under: Hedge Fund Regulation, Today's Post

After being castigated in 2003 for their cozy relationship with their i-banking brethren, equity research departments are now accused of being in cahoots with the hedge fund community.


Fiduciary Alpha

Apr 12th, 2011 | Filed under: Featured Post, Hedge Fund Regulation, Today's Post

Fiduciaries think of a client's needs before their own - sacrificing the latter if required. But does the requirement for a hedge fund manager to put their client's interests before their own help or hinder the search for alpha? It depends on who you ask.


A funny thing happened on the way to the Directive…

Apr 10th, 2011 | Filed under: Hedge Fund Regulation, Today's Post

A funny thing happened on the way to blaming hedge funds for the global financial crisis, formulating a new set of rules to monitor them, politically compromising and scaling back on those rules and then slamming them through.


Could the latest twist in the Goldstein case help shine “disinfecting sunlight” on hedge funds?

Jan 17th, 2011 | Filed under: Hedge Fund Regulation, Today's Post

Hedge fund crusader Phil Goldstein is back in court appealing a verdict that he says is unconstitutional. But this time around, the opinions of a small group of journalists, academics and students could have a profound and lasting impact on the way hedge funds communicate with the outside world.


AIFMD to hedge fund managers: Put that in your pipe and smoke it

Jan 4th, 2011 | Filed under: Hedge Fund Regulation, Today's Post

The Alternative Investment Fund Management Directive has cast hedge fund managers as pariahs to be closely monitored, but research and history suggest the industry will adapt and survive.


“Regulatory Induced Performance Persistence”

Dec 14th, 2010 | Filed under: Academic Research, Hedge Fund Regulation, Today's Post

Yes. You read it right. Regulations that could actually lead to more alpha? Hey, it can happen.


The SEC’s new hedge fund rule: Opening a can of worms, then kicking it down the road

Dec 5th, 2010 | Filed under: Hedge Fund Regulation, Today's Post

The SEC's attempt to regulate hedge funds in 2005 hinged on the definition of "client." By avoiding that question in 2010, its newest kick at the can seems likely to allow the issue to fester even longer. As a result, a University of Washington law professor ponders the question of to whom, exactly, a hedge fund adviser owes its fiduciary duty.


Insider Traders: Rogues or Whistleblowers?

Nov 28th, 2010 | Filed under: Hedge Fund Regulation, Today's Post

It's easy to see why investors find insider trading morally objectionable. But if market prices are a critical form of information transmission, then does "some" insider trading actually help society? And if it does, then what kinds of insider trading?


Gaming the Good Housekeeping Seal of Approval

Oct 14th, 2010 | Filed under: Hedge Fund Regulation, Today's Post

As UCITS-compliant hedge funds become increasingly popular among funds of hedge funds in particular there is growing concern that underlying managers may be bending the rules to get the UCITS seal of approval.


Good, bad or inevitable: Changes are a comin’ to the securities lending club

Oct 5th, 2010 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Today's Post

With the practice of securities lending likely to undergo substantial regulatory change, a recently published paper argues that "CCPs", already being adopted, are the best way forward.


Report: Median performance fee earned by UK mutual funds that have one is, well, not really an issue

Aug 29th, 2010 | Filed under: Hedge Fund Regulation, Investment Management Fees, Today's Post

A new report by Lipper examines the early impacts of the UK's endorsement of performance fees for mutual funds.


SEC to Hedge funds: No need to use “plain English”

Aug 17th, 2010 | Filed under: Hedge Fund Regulation, Today's Post

A recent SEC ruling requires investment advisers to use "plain English" when communicating with clients. But for now, hedge funds can keep confusing people...


Do hedge funds always supply liquidity to markets? Or do they also drink it up?

Jun 29th, 2010 | Filed under: Academic Research, Hedge Fund Regulation, Today's Post

As policymakers debate the value of hedge funds as liquidity providers, they should take note of this recent academic paper.


European Fund Regulations: Fad or new de facto global standard?

May 31st, 2010 | Filed under: CAIA Alternative Viewpoints Columns, Hedge Fund Regulation, Today's Post

There have been a lot of surveys on Europe's latest fashion trend: UCITSIII. Today, a guest author reports on some actual hard data on the topic.


Hedge funds: Wrap it up UCITS and put a bow on top

May 20th, 2010 | Filed under: Hedge Fund Regulation, Today's Post

Panacea, cure-all, the ultimate fix for liquidity, transparency and due diligence issues - whatever you want to call it, UCITS-wrapped hedge funds appear here to stay.


By the way, is there anybody on board who knows how to fly a plane?

May 17th, 2010 | Filed under: Academic Research, Hedge Fund Regulation, Today's Post

An update on a study of the infamous 2008 short-selling bans pins the blame squarely on regulators for inadvertently making a bad situation worse.


UCITS and NEWCITS: A better mousetrap?

Apr 22nd, 2010 | Filed under: Hedge Fund Regulation, Today's Post

UCITS-structured hedge funds continue to be the trend du jour for 2010, but the jury is still out on whether they are the best route to delivering liquidity, transparency and compliance.