February 3, 2007
I disagree with the proposed increase in the net worth requirement to be an acredited investor, because it will make most hedged investments unavailable to a large fraction of investors who can benefit from them. Most hedge funds are less risky than long-only mutual funds, yet are deemed too risky for most investors. Instead, I would favor reducing or even dropping the net worth requirement for acredited investors in hedge funds. This would greatly increase the number of customers for such funds, which hopefully would in turn increase competition among them, which in turn would encourage at least some of them to reduce their currently high costs, notably the 25% of profits that they enjoy.