MFA making lemonade

Futures, Mar 2005 by Collins, Daniel P

After fighting the good fight in opposing the Securities and Exchange Commission's (SEC) quest to register hedge funds, the Managed Funds Association ((MFA) has changed course and is now working with the SEC to make sure managers are prepared for registration and that the registration process is not overly onerous.

At its annual Network conference in Key Biscayne, Fla., MFA Chairman Adam Cooper said the lobbying group was refocusing its efforts on building and reinforcing cooperative and constructive relationships with industry regulators.

To that end, the MFA added a half-day to the conference focusing on the mechanics of hedge fund registration. The panels walked managers through the rules and prepared them for the registration and audit process. SEC Division of Investment Management Director Paul Roye keynoted the event.

Roye set a conciliatory tone and hit on many of the same themes he did at a forum in New York where he told managers that he saw no reason for direct regulation of hedge funds and told them that this was not the camels nose under the tent.

"I want to assure you that hedge fund advisor registration is not the SEC's first step down a slippery slope toward more comprehensive regulation of hedge fund activities," Roye said in the speech.

MFA President John Gaine would like to see harmonization in the way public commodity pools are regulated. Gaine says the MFA is working on reducing duplicative regulations and would like the SEC and the National Association of Securities Dealers to show more deference to the Commodity Futures Trading Commission and the National Futures Association in regards to pools.

JWH'S WINNING PHILOSOPHY

John W. Henry, speaking to the MFA crowd of many New York-based - judging from the reaction to a film on the Boston Red Sox' championship season - hedge fund managers, said developing a valid philosophy and sticking to it is more important than immediate results.

Henry says that he sought ownership of baseball franchises for relaxation. Though that original goal was not fulfilled, he says that there are parallels between a successful CTA business and a successful baseball operation. "Discipline is more important than genius, persistence is more important than talent and performance is more important than capability," Henry says.

Most important, according to Henry, is the ability to create value. Henry saluted members of the alternative investment industry in attendance for the value they have created but encouraged them to be more proactive in educating the investment world on the value of alternative investments.

"We create value in this industry, but I do not think we get credit for it... We are not much more respected than we were in January 1982 [when I started]," Henry said.

Managed futures programs are still dismissed by many as black boxes, says Henry, who would like to hear another tune. "We have to do more to sing the things that need to be sung about this industry."

NYMEX TO OPEN MEMBERSHIP

Also at the conference, New York Mercantile Exchange President James Newsome said that Nymex, which currently doesn't offer a special membership class to hedge funds, will soon change that policy. By opening up membership to funds, Nymex can create value for their seats and funds can receive lower trading fees, he says.