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For Now Hedge Funds Not Deemed Homeland Security Issue


Date: Thursday, March 15, 2007
Author: Christopher Faille

WASHINGTON (HedgeWorld.com)—The Senate declined to take up Sen. Charles Grassley's effort to attach a mandate for the registration of hedge funds to a homeland security bill last week, but his office said he'll continue his efforts for such a mandate.

Mr. Grassley (R-Iowa), who chaired the Finance Committee last year, argued in a floor statement last week that hedge fund registration is a homeland security issue because it's important to know who is managing large sums of money for wealthy overseas investors.

That argument found no traction among his colleagues. But a spokeswoman in Mr. Grassley's office said Monday [March 12], "he will definitely continue to pursue the initiative."

Perrie Weiner, a partner in the Los Angeles-based law firm DLA Piper and an authority on hedge funds, said in an interview Wednesday [March 14] that he believes Mr. Grassley is pursuing this cause because "it's a sexy topic that gives people something to talk about."

Mr. Grassley's goal is to authorize the Securities and Exchange Commission to require investment advisers to register unless the adviser manages the assets of fewer than 15 investors, regardless of whether the investors participate directly or through a pooled investment vehicle.

Mr. Weiner said that there is no real problem that such a solution would solve. "You can count the number of hedge fund implosions on one hand," he said, adding that given the size of the industry, that fact itself is a tribute to the diversified character of such funds, and to the value of the rules and regulations already in place.

Mr. Weiner also spoke favorably of the recent initial public offering of Fortress Investment Group. Fortress went public Feb. 9 Previous HedgeWorld Story. Some on Capitol Hill are concerned about this as a sign of the retailization of investment strategies hitherto reserved for the wealthy.

Mr. Weiner said Fortress "is a good example of a diversified portfolio. It manages hedge funds, private equity funds, and REITs." Investment in such a management firm is in no way comparable to retailization of a hedge fund proper, he said.

Mr. Weiner said he expects that there will be further IPOs of hedge fund managers. He said he believes the industry in the United States has been awaiting the results of IPOs in the United Kingdom, and is now satisfied that the experiment on the other side of the water has proven a success.

CFaille@HedgeWorld.com