Hedge Funds Shrug off Regulatory Threat
As Goldman Sachs faced investigation and Democrats and Republicans battle over financial regulation in the house it appears hedge funds are thriving despite the threat of more stringent rules.
Investors are still putting money into hedge funds and new fund formation is up significantly, Stuart Feffer, the co-CEO of LaCrosse Global Fund Services, said. LaCrosse Global Fund Services is a company that offers "one-stop shopping" for all of a fund's operational and administrative needs and is encouraged by this trend.
"Investors are a bit ahead of the regulators on this and are already using more onshore vehicles, managed accounts, and services for enhanced transparency" Feffer said.
Bank Regulation the Hey for Hedge Funds
With the EU and US attempting to find a set of rules that will effectively regulate the hedge fund industry globally, many industry watchers are worried that a clampdown could be very bad for the sector. This could be true, but hedge funds will be able to cope with any changes, Feffer said.
"The Industry at very least will need to get used to increased disclosure and transparency. In Europe, rules could accelerate trend towards onshore vehicles. There will be a lot of attention, particularly in US, to insider trading and conflicts of interest."
Feffer said he believes that regulatory changes at the banks will actually benefit the hedge fund industry.
"Many effects will be indirect, as a result of regulation of the main providers of liquidity and leverage to hedge funds - the banks," he said.
- Watch the full interview with Stuart Feffer above.
More stringent rules facing the banking industry have seen a number of prop traders leave the banks and set up their own hedge fund, Feffer added.
The biggest risk, according to Feffer, is that more stringent lending rules for banks limit the amount of money or stock they are willing to lend to the hedge funds.
Regulations "could affect the willingness of banks to provide balance sheet and leverage through prime brokerage business," he said. This has been increasing lately, but could reverse if tougher rules on lending are implemented.