Hedge funds may see regulation revived: investor

By Svea Herbst-Bayliss

NEW YORK (Reuters) - Just as hedge funds think they have escaped the tightening of loose current regulation, one large investor expects them to face fresh regulatory pressure after the Bush administration leaves office.

"If the next U.S. president has a more populist view, then hedge funds will be under attack," said Phillip Maisano, who invests roughly $5 billion in hedge funds as head of alternative investments at Mellon Asset Management, at the Reuters Hedge Funds and Private Equity on Tuesday.

The Bush administration this year rejected proposals that would give the U.S. government the right to review hedge funds, and last year a federal court threw out a rule that would have authorized the Securities and Exchange Commission to register hedge funds.

Hedge funds celebrated those decisions, but Maisano cautioned the world's estimated 9,000 funds against thinking they are out of U.S. regulators' sights forever, especially now that more pension funds are putting average investors' money into these portfolios.

"We are already thinking who's next after this administration leaves and what it will mean," he said.

He expects the rule that requires hedge funds of a certain size to register with the SEC to be revived in the coming years.

That rule, briefly in effect last year, allowed SEC investigators to audit hedge funds' books every year. The reviews, analysts argued, would help crack down on fraud in an industry where assets have doubled to more than $2 trillion in the last three years and some big frauds have made headlines.

OUTRAGE ON SALARIES  Continued...