Funds Try to Ward Off New Regulations

Date: Thursday, October 1, 2009
Author: Zachery Kouwe, The New York Times

Hedge funds, trying to separate themselves from the big Wall Street banks, are stepping up their efforts to head off new regulation from Washington.

Representatives of the industry’s main lobbying group met on Wednesday with the Treasury secretary, Timothy F. Geithner; Ben S. Bernanke, the chairman of the Federal Reserve; and Mary L. Schapiro, chairwoman of the Securities and Exchange Commission, to lay out their views of President Obama’s sweeping package of reforms to the nation’s financial regulatory system.

Of particular interest to the group, the Managed Funds Association, is the possibility that Congress will deem some hedge funds as systemically important to the financial system and subject them to onerous regulation and reporting requirements. The group has been focused for months on persuading lawmakers that, unlike big banks, hedge funds do not pose a systemic risk to the economy.

“As we have made clear, we were not the contributors to these financial problems and, where hedge funds have met their demise, nobody got any taxpayer money to help bail them out,” said Richard H. Baker, the association’s chief executive.

Hedge funds have also been engaged in heading off restrictions on trading credit-default swaps and betting on the decline in a company’s stock price.

As part of its push in Washington, the association is expected to elect Darcy Bradbury, a former assistant Treasury secretary and the chief lobbyist of a big fund, to lead its effort. Ms. Bradbury, a senior vice president for the D. E. Shaw group, will succeed Eric Vincent, who is credited with turning the once-sleepy organization into a powerful lobbying group.

In her new role, Ms. Bradbury will work closely with Mr. Baker, a former Republican congressman from Louisiana who was hired in February 2008. Since then, the group’s membership has grown by 45 percent to 1,100 members and now represents most of the $1.5 trillion industry.

“The M.F.A. had historically been under resourced and did not have the staff to respond appropriately to the broad range of Congressional inquiries, much less ones from the regulators, the states and the international community,” Mr. Baker said in an interview.

Mr. Vincent, the president and chief operating officer of Ospraie Management, a large hedge fund based in New York, is expected to become executive chairman of the association.

“His prescience in pulling together industry leaders and motivating them to get more involved in the legislative process has been a tremendous asset to the entire industry,” Mr. Baker said.

The group’s members are also expected to elect several new directors from big industry players.