A report by the President’s Working Group on Financial Markets has called for US financial regulators to take a consistent and uniform approach to dealing with hedge funds.
The working group began a talking to regulators, hedge funds and Wall Street representatives last year as part of their research. The group, which is headed by the Treasury Department, includes representatives from the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Reserve, has met regularly since then to discuss hedge funds.
The report advised that hedge fund managers should have information and risk management systems sufficient to keep their creditors and investors well informed of the risks they pose.
There are about 9,000 hedge funds with approximately USD1.4 trillion in total assets, according to current estimates, a steep rise from USD50billion in 1998.
The report calls for regulators to clearly communicate their expectations for risk management to hedge funds’ regulated counter parties, which notes hedge funds are increasingly using complex financial products such as over-the-counter derivatives and structured debt securities.
Congress has previously held hearings to consider the possibility of new hedge fund regulations, and the new Democratic leadership has expressed their intent to hold further hearings this year.