The SEC and Sophisticated Investors

The SEC has important work protecting those who are not fully aware of conventional investment knowledge.

But those, for example, who invest in hedge funds, ordinarily are not the usual mutual fund investors. It’s strange, therefore, why SEC watchdogs take time to look into such questions as “side-pocket” arrangements” that hedge funds make with their more sophisticated investors. Using them, funds may, for instance, limit the ability for hedge investors to prematurely cash in their stakes.

Hedge funds are not mutual funds. That is why some folks choose to use them. Hedge fund managers may not want investors making early withdrawals, which may help abrogate hedging strategic discipline.

Certainly the SEC has better functions than to teach sophisticated investors how to read simple agreements.