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News September 19, 2005 Issue

Some Hedge Fund Investors Happy to Grant Two-Year Lockups

Itís not only hedge fund managers that are cringing at the thought of SEC regulation.

Some hedge fund investors might not want it, either.

At last weekís SIA hedge fund conference, Simon Lorne, chief legal officer of Millennium Partners, reported that hedge fund managers seeking to avoid SEC registration have not had a problem imposing a two-year lockup on their funds.

Although the SEC anticipated that some hedge fund managers would seek to impose a two-year lockup, said Lorne, "what the SEC didnít anticipate" was that some investors, with their "libertarian" perspective, have readily agreed to new two-year lockups. These investors, he said, are taking the view that "We donít really care if the government is regulating you ó and in fact we might like it better if you arenít [regulated]."

Interestingly, he noted, the SECís two-year lockup provision "freed the funds up" to "think more about private equity" and other long-term strategies. It was an "unusual confluence of forces," he said.