The hedge fund industry has led a charmed life. But with
Eliot Spitzer on the warpath, the industry might want to
reconsider its aversion to regulation of any sort. Before any
more 'bad apples' fall from the tree, it's high time for hedge
funds to start shaping the debate on regulation, rather than
burying their heads in the sand and pretending that everything
is fine. It isn't. You need look no further than Canary Capital
Partners to see that all is not well.
On September 3, Attorney General Eliot Spitzer announced an
investigation of at least four mutual funds that may have sold
out their reliable, bread and butter, Main Street customers in
favor of a flashy new hedge fund client, Canary Capital
Partners. The hedge fund generated many more lucrative fees as
an active trading partner than those smalltime Moms and Pops
did as boring buy-and-hold investors. With...