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Technology Stocks : XYBR - Xybernaut -- Ignore unavailable to you. Want to Upgrade?

To: StockDung who wrote (5363)	1/31/2003 4:40:41 PM
From: rrufff	Read Replies (1) \| Respond to of 6847

OT MORE TROUBLE FOR HEDGIES LOOMING. Reuters Hedge funds hit back at talk of more regulation Friday January 31, 4:22 pm ET By Svea Herbst-Bayliss BOSTON, Jan 31 (Reuters) - Hedge funds are hitting back at regulators who may be planning to limit short-selling, the technique these loosely regulated funds use to make money and, they say, keep markets honest. "We are the sergeant at arms of the financial markets," said Tom Wright, a spokesman for the $30 million Dancing Bear hedge fund that specializes in selling stocks short. "We preserve order and we help markets run efficiently." Others, including executives at some of America's top companies, however, see short-sellers as heartless villains and encouraged regulators to consider putting this fast-growing and secretive $600 billion industry on a much tighter leash. Certain changes had been expected, but the industry got a jolt this week when Securities and Exchange Commissioner Roel Campos suggested regulators may want to restrict a fund's ability to sell stocks short and use borrowed money, or leverage. "That would be like throwing the baby out with the bathwater," said Jane Siebels, who runs Green Cay Asset Management, a $250 million socially conscious hedge fund. Short-sellers borrow stocks in the hope the price will fall. If all works out, they repay the loan for less and pocket the difference. The strategy, while potentially risky because losses can balloon if a manager is short a stock that is rising, paid off extremely well last year as the economy was stalled and many firms missed their earnings targets. The CSFB/Tremont Hedge fund index shows these funds returned an average 18 percent last year, while the average U.S. diversified stock mutual fund lost 22 percent last year, according to Lipper Inc. Often blamed for everything from the Great Depression to the downfall of some of America's once favorite companies such Enron Corp.(Other OTC:ENRNQ.PK - News) , Tyco International Ltd.(NYSE:TYC - News) and now AOL Time Warner (NYSE:AOL - News) , short-sellers say they are not evil at all, but add real value by pointing to real problems at real companies. Siebels, who stands out in the hedge fund industry because she tells executives she is shorting their stock, has bet against AOL Time Warner for years is pleased with what her investors earned after AOL's stock plunged 80 percent over the last two years. Hedge fund managers and lawyers say short-sellers offer balance in the face of overly optimistic projections from Wall Street's investment banks and company executives themselves. "It is very upsetting that the government might focus on limiting those who recognize the abuses of either the sell side or companies and seek to act on their ability to understand a balance sheet independently from what the sell side might think," said Ron Geffner, a former SEC enforcement lawyer, who is now a partner at Sadis & Goldberg. Meanwhile, hedge funds are just as quick to find someone to blame for the new scrutiny they may soon face as corporations are to find the culprit who chopped away at stock prices. "If the SEC is really looking at this, then it is probably driven by influential executives who can't stand short-sellers pushing down their stock," said Dancing Bear's Wright. For example, Dennis Kozlowski, the now disgraced former chairman of Tyco, last year lashed out at hedge funds for pummeling his shares and Jeff Skilling, the now disgraced former chairman of Enron, called one hedge fund manager an "asshole" for asking tough questions on a conference call. Regulators themselves became more curious about hedge funds last summer when several large money managers began to roll out so-called registered hedge funds for less affluent clients, reducing the minimums to several hundred thousand dollars from several million dollars. Now lawyers are nearly sure of one change -- they expect the SEC will force all hedge fund to register as investment advisors where regulators can conduct regular audits. <ed - YIKES!!> This is to give investors, especially pension funds and even retail investors, more peace of mind that their investments are safe. But the timing on anything is else is still uncertain. "It is going to be long time until new regulations that will have any real impact will be enacted," said Alec Haverstick, managing director of the Palladin Group hedge fund which manages over $500 million.