By Mike Foster and Anuj Gangahar
Investment managers are worried about proposed US legislation that would prevent managers of retail funds from managing hedge funds as well. Two bills put forward in the US Senate contain separation proposals - one is in the Mutual Fund Confidence Restoration bill, sponsored by New Jersey Democrat Senator Jon Corzine, former chairman of Goldman Sachs. The other is part of the Mutual Funds Integrity and Fee Transparency bill put forward by Louisiana Republican Senator Richard Baker. ...
...The politicians do not want managers to take long positions in stocks while shorting them for short-term trading reasons in their hedge funds. ...
It is far from certain that the Baker or Corzine proposals will pass into law. Michael Malloy of Drinker, Biddle and Reath, a US law firm, said: "Legislators are going to wait and see what the Securities and Exchange Commission is doing before pushing through tough new laws. But if the legislation is passed, it has a number of ramifications. It is more lucrative to run a hedge fund and there has to be some incentive for talented managers to stay with mutual funds. Otherwise, you will see a talent drain to hedge funds."