Tuesday, November 29, 2005

Paint the bullseye on the hedge funds

Hard on the heels of this New York Times article suggesting that pension funds have been investing heavily in hedge funds comes this new report from Investment News—Hedge fund boom worrying regulators (registration required). The net worth limitation, intended to narrow access to hedge funds to sophisticated investors, was set in 1982 at $1 million and has never been amended.

The net worth and income requirements may both be modified if the trend toward bring hedge funds to a wider audience continues, according to regulators. However, such restrictions likely won't apply to pension funds, whose managers presumably have all the necessary financial sophistication to choose investments wisely. Still, given the temptation for underfunded plans to load up on hedge funds in an attempt to reach solvency, coupled with demonstrated industry volatility (and scandal), one has to wonder about the exposure of the PBGC.

Are the wealthy asking their trust officers about hedge funds?

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