The Terminators: SEC deregistrations remain the exception

Fri Mar 30, 2007

Small funds opt out, but only 13 multibillion-dollar firms pull the plug
By Josh Friedlander

While hundreds of U.S. hedge fund advisors terminated their registrations with the U.S. Securities and Exchange Commission last year, nearly two-thirds of the largest firms remain registered, with only 13 out of the 241 members of the Absolute Return Billion Dollar Club (firms with $1 billion or more in assets) having dropped out. The dropouts include Adage Capital Management, Ospraie Management and Copper River Management (see chart).

Many say their investors are indifferent to registration and that the costs outweighed any hard-to-calculate benefits. "Not a single investor blinked when we told them we'd withdrawn," says one executive at a multibillion-dollar hedge fund. "Nobody takes comfort from SEC registration." Or as another noted: Deregistering looked easier than undergoing their first SEC examination.

But why have most remained registered? Some believe it will be mandated at some...

ISSN: 2151-1845 / CDC10004H

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