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What’s Ahead For Hedge Funds In 2007


Date: Tuesday, January 23, 2007
Author: Dailyii.com

What’s in store for hedge funds in 2007? Forbes magazine sees an industry that is increasingly going to be kept on its toes as a result of changing investment habits and changes in regulation that will wrap hedge funds into a more traditional attire. Here’s what Forbes says are the top five trends:

  • The rising number of institutional investors is going to force hedge funds to become more formal. This trend, Mark Rice, CEO of Tamale, told Forbes, is "pushing hedge fund managers to think clearly about, and formalize, their investment decision-making processes."
  • The Securities and Exchange Commission’s revised "qualified investor" rule will lower the number of potential hedge fund investors – but hedgies won’t mind. "Less qualified investors can cause trouble for hedge funds," says Eric Fitzwater of SNL Financial, "because they are people who getting in over their heads. And this is what causes lawsuits."
  • Hedge fund oversight will remain an unsettled issue.
  • The SEC’s anti-fraud rule, which will apply to both registered and unregistered funds, will result in hedge funds acting in a less covert manner. Fitzwater told Forbes, "The covertness was in their attempt to gain some information for investing. They may have been trying to deceive other people, not their clients, to get information that they may not otherwise be able to obtain.
  • More and more hedge funds will be the target of M&A activity. Citing figures from SNL Financial, Forbes says there were 12 deals last year in which hedge funds were target. Already in the first two weeks of the year, there have been two – Wachovia bidding for European Credit Management and EFG International acquiring PRS Group -- double the 2006 rate.