Yesterday, the U.S. Securities and Exchange Commission raised the net worth requirement for investing in hedge funds to $2.5 million from $1 million. If you saw SEC Chairman Christopher Cox on cnbc.com this morning, you’d know that the rule was made to keep unsophisticated investors out of an incredibly complex industry. Now, the focus is on protecting retail investors by limiting their pension funds from buying into that same industry.
North Carolina State Treasurer Richard Moore was on “Street Signs” this afternoon, and he agrees with Chairman Cox. Even wealthy investors who unknowingly get involved in such a broad space of investments “can have their ‘you know what’ handed to them,” he says. But when talking about pension money managers, that’s a different story.
“For pension funds, we already have so many different fiduciary responsibilities,” Moore says. “I think a pension fund manager who’s involved in this space who does not understand the level of risk they’re taking and the bet they’re making, should be fired for gross incompetence.”
“I don’t think [pension funds are] a place for legislative mandates,” Moore added.
While hedge funds aren’t obligated legally to disclose their investments, Moore says the power pension funds wield allows them to mandate their own terms. His state’s fund is worth close to $71 billion. Most likely any fund would be willing to bend a bit to get his business.