New Managers December 2012

47N - We don't need no regulation

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Fraser McKenzie

This article was authored by Fraser McKenzie, Manager Partner, 47 Degrees North Capital Management is a specialist alternative investment firm, and a pioneer in early-stage hedge fund investing. It was selected as one of three successful candidates out of 97 applicants to manage the emerging hedge fund managers program at CalPERS.

47N is a leading proponent of corporate governance in the hedge fund industry; so the objective of this series of articles is to discuss and inform on current corporate governance issues.

Legend has it that the statement of the Pythagorean Theorem was discovered on a Babylonian tablet circa 1900 to 1600 B.C. To this day, the 24 words that describe the theorem play a crucial role in several different fields of mathematics with applications ranging from building construction to mobile phone location software. At the other end of the spectrum, the European Union's directive that lays down the quality standards for bananas, known as the "bendy banana law", has 1,977 words pontificating on "abnormal curvature" and "minimum tolerances". Clearly, more doesn't necessarily mean better.

The same could be said about regulation - especially when it comes to the small hedge fund manager. There are several reasons often quoted to justify the regulation of hedge funds; curbing fraud, increasing transparency and protecting unsophisticated investors are amongst them. However, such arguments can lead to over-regulation because no matter how much re......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.