Letter: New regulations on hedge funds would hurt underlying beneficiaries, including in Utah

FILE - This Sept. 8, 2020 file photo shows The Charging Bull statue in New York's financial district. (AP Photo/Mark Lennihan, File)

Our nation’s financial system is large and complex, which understandably, leads to misconceptions and misunderstandings about how it works. One of the most significant misunderstandings revolves around hedge funds, a unique but critical part of our economy. Congress needs to understand that hedge funds are an important financial tool for Main Street Americans.

Understanding the complex factors that influence the stock market can be difficult and time-consuming, and hedge funds provide an opportunity for busy professionals to invest and diversify. Hedge funds are cast as only benefiting Wall Street when in reality they do some of their most important work for Utah pensions, university endowments and nonprofits. These organizations use alternative investments like hedge funds to maximize their market portfolios through smart investment strategies. The gains are passed on to the underlying beneficiaries of these organizations: retirees, aspiring college students, as well as individuals and communities supported by charitable work. Hedge funds grow this massive investment, and the returns go to our state’s hard working retirees, who’ve earned the right to a secure financial future.

Adding more regulations to U.S.-based hedge funds gives added incentive to investors to consider offshore funds as different managers set up offshore funds to avoid U.S. regulations. Yet, investors have almost no control over who is managing the money and without proper regulations, non-mainstream offerings can be prone to fraudulent activity because of relaxed regulations in some offshore locations.

U.S. hedge funds are already highly regulated, existing regulations like requirements of proper licensing, background checks, periodic third-party audits, and mandatory reporting protect investors and provide a fair opportunity for financial professionals who follow these regulations. New requirements would only hurt underlying beneficiaries, including those in Utah. Lawmakers need to recognize that hedge funds work on Wall Street and deliver for Main Street.

Andy Singh, Salt Lake City

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