Stricter rules for hedge fund managers are prompting billionaire investor George Soros to get out of the game rather than comply with more the onerous regulations.
Hedge fund and private equity fund advisors will now be required to register with the U.S. Securities and Exchange Commission, according to rules adopted in late June. The SEC is also imposing reporting requirements on certain advisors.
Rather than play by the new rules, billionaire investor George Soros will pack in a 40-year career as hedge-fund manage and return $1 billion in investor money by the end of the year. According to Bloomberg News, Soros Fund Management LLC will manage its $25.5 billion solely for the Soros family.
Though private equity funds handle significant assets for numerous investors, they have worked with little regulatory oversight. According to SEC Chairman Mary L. Schapiro, the new registration and reporting requirements will provide transparency for private fund managers who “previously conducted their work under the radar and outside the vision of regulators.”
Key among the changes is the elimination of a registration exemption enjoyed for many years by private fund advisors with fewer than 15 clients. The exemption counted a fund as one client - as opposed to each investor within the fund - allowing advisors to manage assets for the benefit of hundreds of investors without registering with the SEC.
Hedge fund advisors will now be subject to the same oversight applying to other SEC-registered investment advisors. The registration deadline of March 30 2012 gives hedge fund advisors time to adapt to the new rules, provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Certain private fund advisors will be exempt from the rules, including those who solely advise venture capital funds, funds with less than $150 million assets under management in the United States and certain foreign advisors not based in the U.S.
Hedge funds and private equity funds have held a key position in the portfolios of wealthy investors, according to MillionaireCorner research. A December survey shows that half of investors with assets of $25 million or more own hedge funds, while 56 percent invest in private equity funds. The average balance held in hedge funds is nearly $4.6 million, while more that $4.3 million is held on average in private equity funds.
The $25 Million Plus Investors reported owning multiple hedge funds with 29 percent owning two, 16 percent owning three and another 16 percent owning seven or more. Two-thirds of these affluent investors own hedge funds that invest internationally.
