Sunday, June 14, 2009

An Industry that Dodges Bullets

Entering the year of our Lord 2009, many participants in the hedge fund and alternative-investment industry in were of the opinion that the industry was on the eve of a radical transformation, at worst, effective elimination, due to government actions in a variety of jurisdictions that might result from the ongoing credit/financial crisis.

Yet it now appears that the industry may survive that impulse. I’m impressed by what hasn’t happened – by how any bullets it has dodged of late. Six come to mind at once.

1. The Insurance Department in New York appears to have lost interest in a plan, mooted last year, to regulate CDS’ as insurance.

2. The Governor of New York backed away early this year away from a plan to tax carried interest as ordinary income in that state's income tax

3.. The composition of the EU Parliament has changed in a way that will create difficulties for the implementation of new regulations of hedge fund managers there

4. Three efforts to regulate hedge funds failed in the General Assembly of Connecticut this year: although one of them had passed the state senate, they’ve all died with the end of session

5. In the US federal government, the new administration has dropped plans to radically rework the chart of its financial regulatory agencies

6. And the ban on short selling of a range of finance industry firms announce last fall was allowed to expire, and there seems no impetus to renew it.

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