Even as Connecticut lawmakers approved a small tax credit program to support high-tech startups, New York reportedly is thinking bigger by taking aim at the big hedge-fund sector that ballooned the past decade into Fairfield County”™s fastest-growing industry.
The New York State Common Retirement Fund is readying a two-pronged, $500 million program to focus state investments on new hedge funds, according to the industry trade publication Hedge Fund Alert. Of that amount, some $300 million would be structured as a formal seeding program that would give CRF an equity stake in new hedge funds.
It was not immediately clear the degree to which CRF would consider stakes in hedge funds located beyond New York”™s borders, if at all. In the U.S., Fairfield County is second only to New York City when it comes to hedge funds and assets under management, with the cluster”™s emergence a factor of the county”™s proximity to the city and favorable tax rates.
The New York machinations come even as Connecticut lawmakers once more declined to enact a bill that would have imposed new reporting requirements on hedge funds, light by federal and international standards currently under consideration but which Stamford Rep. William Tong criticized earlier this year as a “chill” on the sector nevertheless.
“I can tell you that as soon as those proposals were mentioned even, they were all over the hedge-fund blogs,” Tong said. “People were aware of it in other jurisdictions, and without full information I think ”¦ there was a lot of misinformation about that effort and frankly maybe some hysteria about it.”
The European Union is considering a far more comprehensive set of regulations, which would among other provisions force hedge funds to disclose compensation their managers receive, and disclose some of their investment moves that are currently proprietary.
The Alternative Investment Management Association Ltd., a London-based trade group, stated in mid-May the rules threaten to cordon off Europe from the global hedge-fund industry, and the new rules have Britons fearing that hedge funds will relocate to other domiciles or make other moves to reduce their exposure to the new rules.
Last week the London-based hedge fund Man Group announced it would acquire New York City-based GLG Partners for $1.6 billion, which Man reportedly attributed in part to the European Union rules that are to take effect in 2012.
It remains to be seen whether the Man-GLG deal was made in isolation, or whether other European investment managers might seek mergers with U.S. counterparts, possibly to include funds in Fairfield County.
Under U.S. Sen. Chris Dodd, the Senate Committee on Banking, Housing & Urban Affairs continues to consider its own set of regulations for the industry, with a possible impact on hedge funds in Dodd”™s home state of Connecticut. The Washington, D.C.-based Managed Funds Association is going along with many of the provisions of the proposed regulations, although it wants greater safeguards to protect the confidentiality of some information hedge funds would have to provide regulators.
“We are concerned with language ”¦ that would subject reported information to (the Freedom of Information Act), as this could subject regulated firms to having their proprietary information publicly exposed to competitors,” said Richard Baker, CEO of the Managed Funds Association, in a prepared statement.
Last week, MFA turned over a list of some 2,600 members to the federal Financial Crisis Inquiry Commission, as part of the latter panel”™s inquiry into the collapse of the financial markets in 2008.
Since then, hedge funds have enjoyed a relative return to prosperity, although they produced a miniscule return on investment in April, with the Lipper Hedge Fund Composite Index up just .02 percent for the month.
