25 Jan 2007
This proposal would define a new category of accredited investor that would apply to offers and sales of securities issued by hedge funds and other private investment pools. The number of households permitted to invest in hedge funds would be reduced by 88% if the change takes effect, according to SEC economists. Under the proposal, only investors worth $2.5 million or more, about 1.3 percent of U.S. households, would qualify.
The proposal, which is open to a 60-day public comment period, also prohibits using the value of a primary home to meet the requirement. The increased investor standard will only apply to hedge funds and not to private companies that rely on other exemptions of the federal securities laws.
Christopher Cox, the current SEC chairman, said in December that the SEC's proposed rules "do a much better job of assuring that individuals investing in private funds are likely to have the knowledge and the sophistication that's necessary."
In the last five years the Bank has grown hedge fund assets under administration from $16 billion to $100 billion and last year posted a 41% increase in assets under administration. The Bank has also experienced significant growth in the average fund size and number of hedge fund structures serviced as part of a strategic focus on building long-term relationships with the leading industry funds.
"We have posted consistently strong organic growth in our hedge fund administration business by customizing our core operational and technology expertise to meet the unique needs of the industry," said Brian Ruane, executive vice president at The Bank of New York. "With institutional demand for hedge funds expected to triple by 2010, we are uniquely positioned to serve this burgeoning industry through hedge fund administration and a variety of other securities services."
Global institutional demand for hedge funds will increase from $360 billion currently to more than $1 trillion by 2010, according to a recent study of leading institutional investors, investment consultants and hedge funds by The Bank of New York and Casey, Quirk & Associates LLC. Retirement plans globally will account for the vast majority of asset flows.
In addition to hedge fund administration, the Bank offers accounting, cash management, collateral management, custody, trust, asset management and private banking services to the hedge fund industry.
The Bank of New York Company, Inc. has a global array of services that enable institutions and individuals to move and manage their financial assets in more than 100 markets worldwide. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has consistently played a prominent role in the evolution of financial markets worldwide.