Time for a Long-Due Hedge Fund Remedy?

Despite all the intelligence at their disposal, human beings have always had a thing for making mistakes every now and then. This fact has already been proven quite a few times throughout our history, with each testimony essentially forcing us to look for a defensive cover. To the world’s credit, it will find that exact cover as soon as we bring dedicated regulatory bodies into the fold. You see, having a well-defined authority across each and every sector changed the entire game, and it did so by instantly concealing a lot of our shortcomings, thus making the human life more seamless than ever before. Nevertheless, the utopia won’t stick around for very long, and if we are being honest, it was all technology’s fault. We say this, because the moment technology and its layered nature took over the scene, it gave people an unprecedented chance to fulfill their ulterior motives at the expense of others. Such a dynamic, unsurprisingly enough, overwhelmed our governing forces and sent us back to square one. However, it won’t spell the end of the stated runner, as the regulators will make a comeback. In fact, this has only grown more evident over the recent past, and a new proposal should very well solidify it further.

The US Securities and Exchange Commission has officially proposed a rule to improve the quality of disclosures it receives from large hedge funds in regards to their investment strategies and overall leverage. According to certain reports, the new rule, which the SEC jointly-proposed with Commodity Futures Trading Commission (CFTC), will expand requirements for advisors and large hedge funds with a minimum net asset value of $500 million. This expansion will likely call for more details on the firm’s borrowing and financing arrangements, open positions, and certain large positions. Furthermore, large hedge funds, under the new framework, are also expected to provide an extensive lowdown on their cryptocurrency exposure. The latest proposal follows up on authorities’ longstanding bid to improve Form PF disclosures. Now, while the concerns over private fund industry have been there for years, the moment they turned into bit of an emergency can be traced back to 2020 when hedge fund de-leveraging caused some serious disturbance around the US Treasuries market. This would only get worse following the GameStop “meme-stock” saga, thus setting the stage for a major makeover.

However, even though the move feels like a step in the right direction, there are a few experts who have come out to criticize it.

“The SEC should focus on better utilizing (existing) information rather than imposing new burdens on fund managers,” said the MFA’s (Managed Funds Association) chief executive, Bryan Corbett.


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