Last year, the hedge fund industry anticipated significant change as a result of the Securities and Exchange Commission’s JOBS Act, which was intended to open communication and increase transparency between hedge funds and potential investors. Brooke Harlow, executive vice president and managing director at Managed Funds Association, recently discussed the development and its apparent lack of impact on the market thus far.
She explains: “For years, the general solicitation ban left fund managers at a clear disadvantage, unable to discuss- or defend- their funds in public for fear of regulators interpreting their words as an advertisement for new investors.”
“Removal of the advertising ban led many observers to speculate about when we might see the first wave of advertisement from hedge funds on interstate billboards or as Super Bowl commercials,” she continues. “Anyone holding their breath for a flurry of hedge fund ads running alongside holiday commercials as we close out the year might be disappointed, but commentators attributing managers’ lack of engagement in public communication to widespread disinterest or fear of tarnishing their image with investors are ill-informed.”
Harlow goes on to explain that while many funds have reaped the benefits of the new SEC rules, some are still shackled by other limitations. “Many SEC-registered managers also claim a registration exemption from the Commodity Futures Trading Commission, and to qualify for the exemption managers are forbidden from marketing interests in commodity pools to the public in the U.S.” There are various other obstacles in place as well, according to Harlow, but efforts are already being made to remedy the situation. 2014 has the potential to be a promising, revolutionary year for the hedge fund industry.
“For too long, the hedge fund industry was at a competitive disadvantage in the communications landscape,” Harlow says. “Recent regulatory changes will help the industry evolve to provide a greater level of transparency and information sharing with investors and the public. While more regulatory work is needed, the rules written in 2013 could help ensure that next year is one in which hedge funds are able to seize new opportunities to grow and educate the public- to the benefit of everyone involved.”