WASHINGTON – The Securities and Exchange Commission hearings on hedge funds here yesterday focused on suitability, the definition of hedge funds and whether a regulation crackdown is needed.

David Vaughan, a partner in the financial services group of Dechert, said, "There is no precise definition for a hedge fund. People know one when they see one."

James R. Hedges, president and chief investment officer of LJH Global Investments, said he does not see a big push in the hedge fund industry to capture the retail investor through funds of funds. The industry is waiting first to see how regulation shakes out, Hedges said. "They have no interest in selling their product to a retail audience now," Hedges said.

Other hedge fund executives denied using unduly risky strategies and said further regulation is not necessary.

"While there are frequent reports of high returns for hedge funds, there are reports just as frequently that highlight possible areas of concern, such as potential conflicts of interest, questionable marketing techniques, valuation concerns and the market impact of hedge fund strategies," said William Donaldson, chairman of the SEC. He added that the SEC will continue its investigation into hedge funds.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.