Skip to content
Subscriber Only
Barry Ritholtz

Hedge Funds and Private Equity Need Full Disclosure

Many function just like mutual funds or ETFs, yet operate behind a veil of secrecy. 

Where would be be with full disclosure?

Where would be be with full disclosure?

Photographer: Timothy A. Clary/AFP/Getty Images

The U.S. Securities and Exchange Commission is considering letting nonaccredited investors put money into closely held investment pools such as hedge funds, private equity and venture capital.  This alone is reason to reconsider the issues of transparency and disclosure by these investment alternatives.

Unlike mutual funds or exchange-traded funds, these pools of investment capital don't have to provide much in the way of transparency. True, they must register with the SEC if they are large enough, but beyond that they don't have to disclose much of anything. They don't have to disclose the amount of assets under management, list their biggest holdings or reveal investment returns. They don’t even have to disclose the identity of their senior managers.

The SEC should mandate public disclosure of the details mentioned above.