"I do think, at least initially, that some funds may start dipping their toes into the general solicitation waters primarily to raise their brand profile, but they will stay pretty conservative in their approach," emailed Steven Nadel, a partner with Seward & Kissel, a law firm doing work in the private equity sector. "Over time, depending on consumer and regulatory reactions, the needle may slowly move towards more aggressive actions."
Indeed, regulators will be watching carefully. They will be watching for shady operators who might creep in and, well, lie to investors about investments. Regulators always look for that.
But in this case they'll be watching the advertisers, legitimate and otherwise, to make sure they are doing business only with investors with the wherewithal to make intelligent (in theory) judgments.
Some think that will cut down on the pool of eligible investors and therefore the need for widespread advertising. Others aren't so sure and note there may be lots of untapped money ready on the sidelines.
"I think that there is a certain amount of 'unconnected' money that will be moved by the hedge fund ads," said Michael Farr of the investment management firm Farr Miller & Washington. "I think it will result in a short spurt of new funds. Then, I think that additional ads will compete for 'alternative' money in motion."
By "unconnected" money, Farr said he means well-off individuals without a regular broker.
"These folks are often small business owners who keep their heads down and squirrel money into huge Fidelity and Schwab accounts," he said in an email. "You would be amazed at the multimillion-dollar accounts that walk through the front door of the Fidelity office and open accounts at the counter. These ads may be their first opportunity to access the rarefied hedge fund air."