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Hedge fund fraud?

Most hedge funds are honest. Investors needs dozens of DIFFERENT hedge funds in their portfolios. As in EVERY business there are a few frauds. If the price of consistent capital growth at low risk is a few scams, I'll take that trade every time and so will most investors. That is the reason for the "dizzying growth" of the industry; PROPER hedge funds deliver what pension funds, widows, orphans and everyone else wants - reliable investment returns.

Most "regulated" mutual funds haven't made a cent in over 6 years and take much higher risk than hedge funds. With suffcient expertise and experience you can detect a likely hedge fund fraud with ease. Any doubts, just don't invest; there are plenty of reliable, ethical, well-managed hedge funds to choose from. Like any investment, do your homework.

SEC registration would do nothing to prevent future scandals. The lack of regulation is a myth anyway. Fraud is against the law - period. A hedge fund manager is regulated to a higher standard than anything the SEC could impose. Institutional and high net worth clients, surrounded as by financial advisers, accountants, private detectives all checking backgrounds. Brokers, administrators, custodians, lawyers and independent auditors take headline risk because of the checks and balances and ongoing due diligence that occurs on a daily basis.

There are 8,000 hedge funds and coincidentally a similar number of investable US stocks. Some stocks will be around a long time but a significant proportion will disappear, go bankrupt, are just plain corrupt and/or incompetent. Does this jeopardize the entire stock market? Should you avoid all stocks just because of regular stock scandals? The recent SEC regulated Refco IPO didn't protect investors at all. Diversification and due diligence are the solutions to the business risk of hedge funds. Bayou, Wood River, KL Financial, Eifuku, LTCM...these events are extremely rare.

The SEC alledgedly protects Mom and Pop. Really? Letting them buy high RISK long only funds when superior and safer methods of investing and managing risk are available. Institutions and the wealthy know a better product when they see it; retail should be allowed in too.

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