Hedge Fund Industry Prepares to Advertise

Last month, the Securities and Exchange Commission issued a rule that will enable hedge funds and other private investment firms to advertise publicly. The new development will change the way hedge funds have run for 80 years; restricted by advertising parameters aimed at protecting small investors.

While many are expecting a significant shift in the market, Brooke Harlow of the Managed Funds Association believes the “impact of the new rules is likely to manifest itself in a less sensational, yet more meaningful way for investors.” She explains that by “lifting the ban on general solicitation, Congress and the SEC have opened the door to greater transparency and information sharing between funds and those qualified to invest with them.”

USA Today explains that “while the rule would authorize firms to raise unlimited amounts via mass advertising of private offerings, it would require reasonable steps to ensure that buyers are so-called accredited investors- who are wealthier and deemed better able to gauge investment risks.” The article adds that “the rule would also make it easier for start-up businesses to raise funding without immediately requiring compliance with SEC disclosure rules.”

According to D. Brooke Harlow, one thing is certain: “A very competitive industry is about to get even more competitive, with more funds using a broader range of tactics to attract investors from a limited qualified investor pool.”

Harlow goes on to explain that as the change occurs, hedge funds would do well to delve into several new areas, including branding, media relations, events and speaking engagements, and digital and social media.

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About James Cannon

James Cannon is an experienced hedge fund analyst. He has served on the advisory boards for various different Fortune 500 companies as well as serving as an adjunct professor of finance. James Cannon has written for a variety of Financial Magazines both on and off line. Contact James at james[at]businessdistrict.com