Senator Concerned About Hedge Funds

Sen. Charles Grassley, chairman of the Senate Finance Committee, wrote to several financial regulatory agencies this week to express concern about the lack of hedge fund oversight and to ask for advice on how Congress could improve the transparency of hedge funds.

Grassley (R-Iowa) said in the letter that “tens of millions of Americans may be unwittingly exposed to hedge fund investments” through public and private pension plans that invest in hedge funds. As a result, significant future losses at hedge funds could put many workers’ retirement security at risk, Grassley wrote, and could cause losses at the federal pension insurance agency, the Pension Benefit Guaranty Corp.

After hedge fund Amaranth Advisors collapsed last month because of a $6-billion loss in energy trading, Grassley said he asked his staff to determine the extent of pension fund investments in Amaranth and other energy-focused hedge funds. But the information was not available from public records or financial regulators, the senator wrote.

“It’s disturbing that we can’t even come close to understanding the extent of the risks because hedge funds operate in such a secretive way,” he said in a prepared statement accompanying the letter.

Grassley’s letter indicates that the issue could be on the Senate Finance Committee’s agenda when Congress returns after the midterm elections.