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What (If Anything) Should a Hedge Fund Have to Disclose?

I run a(n) unleveraged personal portfolio. While I drop hints of what I'm doing from time to time to the seeking alpha site, I don't really tell people what I am doing. Nor should I have to. The "portfolio" listed for me is by no means complete, and also includes stocks that I don't own.

Much the same might apply if I were running a hedge fund for say, 100 people, using only "proprietary" capital belonging to us collectively. I'd be "level" with my partners, that would be a selling point, but we shouldn't have to tell what we're doing to the outside world.

The situation changes if we leverage and use borrowed money. Then our portfolio is no longer "proprietary" but includes borrowed money. The lenders would know what we hold anyway, or should, making it a condition of the loan. And if we want to potentially be the recipients of bailout money, a reasonable quid pro quo would be public disclosure of our holdings.

Here's a "solution" that addresses both issues. Make hedge funds disclose their holdings to the extent and only to the extent that they are financed with borrowed money. Holdings held with "proprietary" (non-debt) money should remain proprietary.

So if I have a $10 million hedge fund of proprietary capital (as I hope to, someday), I shouldn't have to disclose any of the holdings. If I leverage that to $100 million by borrowing $90 million, I should have to disclose 90% of the holdings. But the 10% held with proprietary capital would be exempt from disclosure.

That would give hedge funds an incentive not to borrow, so they would not "have to reveal."