Hedge Funds, Grimacing, Open the Kimono

It’s late August, and someone’s groaning about a stack of homework that is causing an early, cruel end to beach season. High schoolers? Nope—the managers of America’s largest private investment funds, who by Aug. 29 must file a new form providing the Securities and Exchange Commission and other federal regulators with detailed information on their operations. At 42 pages, with more than 1,000 data fields, Form PF (PDF) is a chore to fill out and a threat to the secrecy in which hedge funds and private equity funds prefer to operate. “Every year for many years, August was the month everybody went to the beach,” says Doug Schwenk, the founder of Advise Technologies, a company that makes software to help funds complete Form PF. “There are a shocking number of people sitting in the office this month, plugging away at their homework.”

PF stands for private fund—the hedge funds, private equity funds, and their kin that have avoided oversight by taking on only a limited number of wealthy investors. The regulatory rationale: If a few millionaires want to risk their shirts, let ’em. That thinking changed with the 2008 financial crisis, and the realization that excessive risk in one corner of the financial sector can threaten the whole economy. Form PF is an outgrowth of the 2010 Dodd-Frank financial reforms, and it requires private investment funds to give the government more information than ever before.