Soros warns against ‘regulatory overkill’

Several prominent hedge fund managers hinted that better regulation of the hedge fund industry is a good idea, but stopped short of endorsing stricter oversight.
NOV 13, 2008
Several prominent hedge fund managers hinted that better regulation of the hedge fund industry is a good idea, but stopped short of endorsing stricter oversight. Hedge funds are "virtually unregulated" and "regulators aren't even certain how many hedge funds exist or how much money they control," Henry Waxman, chairman of the House Committee on Oversight and Government Reform, said at a hearing in Washington today. Although he supports some form of hedge fund regulation, George Soros, chairman of Soros Fund Management LLC of New York, noted that in the wake of recent losses in the financial markets, there is a "real danger" that "excessive deregulation will be succeeded by punitive reregulation." "That would be unfortunate, because regulations are liable to be even more deficient than the market mechanism," he said, speaking before the committee. "Regulators are not only bureaucratic [but also] susceptible to lobbying and corruption," Mr. Soros said. "It is to be hoped that the regulatory reforms outlined here will preempt a regulatory overkill." Kenneth Griffin, founder of Citadel Investment Group LLC of Chicago, noted that "proper regulation is critical," but added that "the best regulation is created with an eye toward unleashing opportunities, not limiting possibilities … To achieve this, Congress, regulators and industry must all work together." James Simons, president of Renaissance Technologies LLC of New York, suggested that hedge funds' positions be reported to regulators and be made available to the Federal Reserve Bank of New York but should never be released to the public. However, Philip Falcone, senior managing director and co-founder of Harbert Management Corp. of Birmingham, Ala., suggested that greater transparency wouldn't be a bad idea. "I support some additional government regulation requiring more public disclosure and transparency for hedge funds as well as public companies,” he said in a statement. "All investors, whether individuals or sophisticated institutions, have a right to know what assets companies have an interest in — whether on or off their balance sheets — and what those assets are really worth."

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