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Frank Meyer Benedicte Gravrand, Opalesque Geneva:

Veteran hedge fund manager Frank Meyer recounts the industry as it was in the late 1960s and predicts a mounting predicament in the cost of regulations. He also foresees investor representation for separate accounts and deep-pocketed institutions taking on the role and the liability of administrators in place of managers.

Frank C. Meyer, co-founder of U.S.-based Galaxie Financial Group LLC, took the audience back to the hedge fund world of the late 60s in the U.S. during the recent Gaim Ops conference in Geneva (organised by ICBI).

Back in 1969, he said, hedge funds did not have institutional investors as most of the latter were prohibited from investing in non-registered advisors; and most hedge funds then were not registered. Besides, short-selling was associated with market manipulation [remember, short sellers were blamed for the Wall Street Crash of 1929] and arbitrage with extreme risk. And anyway, being registered meant the Fulcrum Fee (additional performance fee tied to a benchmark) had to apply.

In those days, shorts had to be considered separately from longs. Short bets were typically made on firms that managers thought were fraudulent. Sometimes, managers would even go to the SEC to expose frauds. They did not cover the short (buy back the securities that were sold short) due to tax advantages, which they wanted their investors to enj......................

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