Navigating the Hedge Fund Maze - November 2008

November may not have produced an upswing in hedge fund performance, but it did provide some political stability with the election of Barack Obama. Now that the American people have chosen the next president, one has to wonder what the new administration will do about the hedge fund industry. In the past, Obama has supported legislation that cuts off tax benefits for alternative investment firms and requires hedge funds to set up anti-money laundering programs, notes FINAlternatives. However, he did receive contributions from the industry, which makes it more likely Congress will be the ones taking a stab at hedge funds rather than the new administration.

Highly scrutinized Treasury Secretary Henry Paulson has made the suggestion that hedge funds be required to draft a charter and allow more oversight by reporting to the Conduct of Business Agency. Although not yet formed, the CBA could become a new entity within Congress. The CBA, which was proposed by Paulson back in March, would set net capital requirements on hedge funds and would prove more severe than the Securities and Exchange Commission's controversial hedge fund registration rule, reports FINalternatives.

In the post-meltdown era, the government has more leverage than ever to regulate hedge funds. As the industry waits to see what President-elect Obama and the new Congress have planned for them, hedge funds may want to contemplate the gigantic hole they are leaving in the real estate market. As hedge funds tumble they are freeing up some prime New York office space. That's just another unintended consequence of the hedge fund maze. Read about November's winners and losers below.