Connecticut is home to many hedge funds, and various proposals to oversee them are in discussion, according to Dow Jones.
Republican state Rep. John Stripp of Weston, Conn., proposed a bill that would require a hedge fund receiving more than $10 million from pension funds to report to the state’s banking commissioner within 30 days. Such reports would include the name of the pension fund, the names of its clients, the address of its manager, and the total amount of funds under management for each such pension fund. More and more pension funds are considering adding assets to hedge funds.
A public hearing on the legislation is scheduled for today.
Attorney General Richard Blumenthal said that the bill is worth considering, but it addresses “only a narrow segment of the potential problem.”
“Pension funds are often in a better position to do the necessary due diligence than individual investors, but I would also like to see a requirement that the pension beneficiaries be informed” by the pension funds about hedge fund investments, Blumenthal commented.
Banking Commissioner Howard Pitkin is not in favor of the bill and plans to submit written testimony against it, said Jim Heckman, a spokesman for the Connecticut Department of Banking.
The proposal is “a remedy in search of a malady,” said John Brunjes, a partner in the Hartford office of McCarter & English, a law firm that represents hedge funds.
The legislation is “somewhat scattershot,” said Brunjes, and its statutory authority and reach are “somewhat questionable.”
“It harkens the prospect that some elements in the state are seeking to impose on the ability of hedge fund managers to operate freely,” he said. Fund managers will think twice if they want to remain in the state, which is not a good thing, as hedge funds are an important driver of the economy, he said.
Stripp said the reports could serve as an “early warning alert” to help avert hedge fund catastrophes. If a hedge fund with a lot of pension fund money is giving signs of problems, “the Banking Commission would have to be on its toes and marshal the troops for some action that might be required.”
Blumenthal stated that the Banking Department has no authority to demand that hedge funds reveal information on how they’re investing, adding that he would prefer it if the federal government took steps to require greater transparency and disclosure.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.