When hedge funds embrace regulation

April 3, 2009

Paul Singer, the ardent Bush supporter and laissez-faire capitalist who runs the $13 billion Elliott Associates hedge fund, has an astonishing op-ed in today’s WSJ:

Now we must create a new regulatory infrastructure that will meet three fundamental tests… finally, it must bring all investors and traders — regardless of whether the risk holder is a hedge fund, bank, private equity fund, individual or government agency — under the regulatory umbrella…
I understand the inclination among free-market conservatives to dismiss the government’s regulatory efforts as misguided. Some government actions over the past year have been reactive and incomplete. Yet these actions have been large and reasonably fast, which were the critical elements for the survival of the system.

The op-ed comes in the wake of the G20 meeting which agreed that hedge funds should be regulated, so maybe Singer is simply bowing to reality here. But this is still something of a watershed moment. Singer is one of the most politically astute hedge-fund managers in America, and where he goes the rest of the industry is probably likely to follow.
So if you thought there would be a lot of pushback from the hedge-fund industry against proposals to regulate it, think again. The industry will want a say in how any legislation is worded, of course. But it has also lost hundreds of billions of dollars over the past couple of years as a result of insufficient regulation of the global financial system. Maybe the hedgies are finally realizing that the only thing worse than too much regulation is too little.


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