Hedge funds agree to more regulation of their industry

At a House committee hearing, hedge fund managers agree to more regulation of their industry

WASHINGTON, DC - At a hearing of the House Oversight and Government Reform Committee, five of the largest hedge fund managers said they would support greater oversight of their industry. Although they denied hedge funds were responsible for the financial crisis, because some funds do create more risk in the financial system and given the current market turmoil, they agreed that more transparency of the industry would be welcome.

The hearing came as senator Charles Grassley, ranking member on the Finance Committee, announced he intends to reintroduce legislation to require hedge funds to register with the Securities and Exchange Commission (SEC). In 2004, the SEC did attempt to force hedge funds to register with them, make certain information public and allow the supervisor to review their books. The programme failed, however, following a federal court challenge by one fund that was not appealed by the SEC.

At the hearing, George Soros, chairman of Soros Fund Management, stated that the entire US regulatory framework needed to be "reconsidered" and hedge funds need to be regulated within that new framework.

The other hedge fund managers that testified were John Alfred Paulson, president of Paulson & Co, James Simons, president of Renaissance Technologies, Philip Falcone, senior managing partner of Harbinger Capital Partners, and Kenneth Griffin, chief executive and president of Citadel Investment Group.

The managers confirmed that they would now be willing to provide information to supervisors for the purpose of monitoring systemic risk. However, they would not support releasing information on their investment strategies.