January 26, 2007
MINIMUM NON REAL ESTATE (ESPECIALLY HOMES) NET WORTH REQUIREMENT NEEDED TO INVEST IN PRIVATE FUNDS (HEDGE FUNDS) SHOULD BE RAISED FROM $1 million total net worth to $2 million net worth excluding real estate.
Quite frankly, I do not know why this rule has not been changed earlier. The price of homes in the US has risen so high that many average citizens who are in their 50's or 60's and have paid down their mortgage over the years would have half million net worth just in their home. Many of course have much much more. There is no connection to sophistication in trading markets, or ability to understand complex financial instruments that, honestly, many professionals and PhDs have trouble understanding.
There is no assurance that the higher minimum would limit investing in hedge funds to more sophisticated investors, but it is without doubt a needed improvement in the test.
THE VOLATILITY IN THE MARKET CURRENTLY IS AT HISTORIC LOWS, INDICATING INVESTORS ARE NOT WORRIED ABOUT RISK.