Retail Investors to Shine in Hedge Funds’ Bright Light?
Posted by
Beth Kurth on Mon, Feb 20, 2012 @ 01:47 PM
Well this is interesting. Consider that a bright light is always likely to reveal something you wouldn’t otherwise see. For example, a flashlight when you’re looking under the couch for the remote and oh look, there’s the missing Scrabble tile. And consider now we have the SEC undertaking the registration and inspection of hedge funds. What is the likelihood the SEC won’t find anything? This is not to say that hedge funds are investors gone wild, rather than a bright light is always likely to reveal something you would not otherwise see.
It’s hard to know exactly what the SEC might find – anything from shoddy record-keeping to investment performance misrepresentation to market manipulation. Or maybe nothing at all. The likelihood, however, is a continuation of stories that keep hedge funds in the news – and not in a positive light.
The recent muck of insider trading, including hedge funds Galleon Group LLC, Level Global Investors LP, and Diamondback Capital Management LLC, is remarkable. These funds were flouting regulations and trading on material non-public information as the cornerstone of short-term obsession.
Of course it’s possible that all the malfeasance has been spotted and these actions and stories are a thing of hedge funds’ past. But it doesn’t seem likely.
The good news is there is another group ready, able and willing to take on the role of evaluating and investing in publicly traded companies – the retail investment community. Smaller investors respectful of the regulatory environment, less subject to the pressures of quarterly performance, and ultimately more interested in the longer-term prospects for a company and its stock.
Just as community banks’ standing was lifted when the big banks overstretched their limits, so too do retail investors have the opportunity to rise to prominence in the days ahead. Today’s triple word score? Retail Investors.