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Alternative Market Briefing

Enhanced risk management and due diligence needed on hedge funds ad rule

Wednesday, July 31, 2013

amb
Kristoffer Houlihan
Komfie Manalo, Opalesque Asia:

This coming fall, expect hedge funds, private equity funds or early-stage companies to start pitching opportunities to buy into the once 'for elite-only’ portfolios as the Securities and Exchange Commission lifted the 80-year ban on advertising by private placement offerings.

But Kristoffer Houlihan, founder and Managing Partner at independent strategy and risk advisory company Armilla Partners, warns that the lifting of the long standing ad ban could trigger a risky, black box investment culture that takes undue advantage to gullible investors.

"The new rule could evoke more interest about hedge funds and more need for evaluation. We expect more request for information about hedge funds and other private placement offerings in the coming months. People will start asking questions," Houlihan said in an interview with Opalesque.

However, the new SEC rule did not change the restrictions on hedge funds. Houlihan noted that the same rule applies that private funds can sell their products to accredited investors with at least $1m in net worth, excluding their primary residence, and those who earned more than $200,000 annual over the past two years.

This could hurt entrepreneurs and small businesses that the JOBS Act intended to protect and promote by finding new ways to fund their businesses in the first place, Houlihan warns. Fund managers must establish the qualificat......................

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