Securities: Hedge Fund Investing Reforms Considered

The Securities and Exchange Commission is considering raising the minimum income and net worth people must have in order to buy into hedge funds. Hedge funds are a largely unregulated means of investing. Currently, an individual or a married couple needs at least $1 million in net worth, including home equity, or at least $200,000 annual income, or $300,000 for married couples, to invest in a hedge fund. However, these amounts have not been adjusted for inflation.

Hedge fund investing reforms considered

Jay Gould, a partner with Pillsbury Winthrop Shaw Pittman, who represents hedge funds, says that had hedge fund income qualifications been raised to meet inflation rates, "they will probably raise it to $2 million or $3 million in net worth, excluding home equity." The change is not expected to meet much opposition from hedge funds or investors; even with a $2 million net worth requirement, "the vast majority, 90 percent, of current hedge investors would more than qualify," says Charles Gradante, co-founder of a hedge fund advisor group for investors. People who manage hedge funds likely are to be most affected by the changes; many of these people pool lesser amounts of money from smaller investors and spread it across multiple hedge funds.