Monday, April 02, 2012

JOBS Act to Bring Light to Hedge Funds

A great example of way regulations tend to protect industries from competition more than help consumers, a great example is the law that prevents hedge funds from disseminating their performance. This allows funds to create massive amounts of survivorship bias via the use of several funds within one main brand, and it's much harder to quantify this because by law they can't tell you how they do.

One can imagine if more people were aware of Madoff's returns, and his purported assets under management, lots of people would have figured out it was a Ponzi scheme just as Markopolos did. More people would have learned about pairs trading in the 1990s via the fat returns, and this would have created more efficient trading exchanges faster (they were arbing the pre-internet retail flow).

The new JOBS act would rectify a good deal of this:

In its current form, the JOBS Act will allow private equity and hedge fund managers to solicit investors directly, rather than through third parties as per the current rule.

It only took 80 years to get rid of this dumb regulation.


Anonymous said...

You will be interested in this:

Mercury said...

I’m willing to believe that hedge fund/accredited investor rules were in fact designed to protect “the little guy” but not only would getting rid of this make hedge funds more honest it would provide a wider array of options for retail investors. How many IRA holders wish their Morningstar-loved mutual fund had a high-water mark and sliding fee scale right now?

Anonymous said...

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