Private equity regulation may be next

By Michael Flaherty

NEW YORK (Reuters) - As hedge funds come under increased regulation, some private equity experts believe that the buyout industry may be next.

February 1 was the deadline requiring certain hedge fund advisers to register with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940.

Private equity is exempt from the new rules, but some in the industry believe that regulators could broaden their reach into the booming buyout business.

"It is just a matter of time," said Erik Hirsch, chief investment officer at Hamilton Lane, an advisory firm overseeing more than $48 billion in private equity commitments by institutional investors.

"It is hard to believe you can have an asset class as large as this and not have someone ... make it a bit more regulated," Hirsch said, speaking at the Reuters Hedge Fund and Private Equity Summit in New York this week.

Hedge funds, which buy and sell securities rapidly, hedging their bets with long and short positions, have ballooned from a few dozen funds a generation ago to 8,000 firms with more than $1 trillion under management.

Private equity funds, which buy companies using mainly debt, restructure the business and sell it later, have also grown in recent years, raising more than $200 billion from investors last year. The industry makes up nearly one-quarter of merger and acquisition volume, up from 5 percent only a few years ago.

A business that once toiled mainly in the private markets is now going after large, publicly traded targets across the globe.  Continued...