Largest Hedge Fund Investors Oppose SEC Registration, Says Hennessee

The Hennessee Hedge Fund Advisory Group says its survey of hedge fund investors found that larger and more sophisticated hedge fund investors oppose the Securities and Exchange Commission (SEC) proposal to require US hedge funds to register under the Investment

By None

The Hennessee Hedge Fund Advisory Group says its survey of hedge fund investors found that larger and more sophisticated hedge fund investors oppose the Securities and Exchange Commission (SEC) proposal to require US hedge funds to register under the Investment Advisers Act of 1940. The increased popularity of fund of hedge fund products has made it very difficult to determine the entire amount of capital that foundations and endowments have invested in hedge funds, says Hennessee, since they are commingled with other investors.

The consultancy says its survey was conducted to ensure that foundations and endowments are accurately represented and their opinions are conveyed to the SEC in response to its proposed registration rule.

“The survey shows that 59% of participants were in favor of the proposal requiring hedge funds to register as RIAs,” says E. Lee Hennessee, Managing Principal of Hennessee Group LLC. “However, the 30% that were against the proposed rule manage three times more capital, allocate 46% more to hedge funds, and have 50% more years of experience investing in hedge funds.”

The survey encompassed 46 foundations and endowments with total assets of $44 billion. Findings of the Survey include:

The survey indicates that foundations and endowments that invest in hedge funds have an average of 17% allocated to hedge funds.

46% of the participants started investing in hedge funds after 2000.

The size of the allocation to hedge funds increases with the number of years experience investing in hedge funds, not the overall size of the investment portfolio.

59% of the participants are in favor of the SEC’s proposal requiring hedge fund management companies to register as Registered Investment Advisers.

The average foundation and endowment that are in favor of registration managed $536 million versus the $1.8 billion for those that are against of the proposed rule.

The average foundation and endowment surveyed has been investing in hedge funds for 7 years. Those that are in favor of the proposed rule have an average of 6 years experience investing in hedge funds and those that are against have 9 years experience.

The participants who are in favor of the proposed rule have an average of 15% allocated to hedge funds, with 8% invested directly with hedge fund managers and the remaining 7% through fund of funds products.

The participants who are against the registration requirement have an average of 22% allocated to hedge funds, with 15% of the capital invested directly with hedge fund managers and the remaining 7% through fund of funds products.

«