Democratic Underground - Hedge fund executives want publicity rules changed

http://today.reuters.com/misc/PrinterFriendlyPopup.aspx?type=businessNews&storyID=2006-06-14T193503Z_01_N14332681_RTRUKOC_0_US-FINANCIAL-HEDGE-PERCEPTION.xml

NEW YORK (Reuters) - U.S. securities regulations restrict the hedge fund industry from defending itself adequately against a bad rap in public perceptions as being secretive and prone to fraud, top hedge fund officials said at a conference on Wednesday.

Hedge fund managers are barred by the so-called general solicitation rule from publicly discussing their fund performance, fund-raising or other matters that may be interpreted as advertising to the general public.

But hedge fund managers said the rule prevents them from educating the public about the benefits hedge funds bring to financial markets, which include increased market liquidity, better pricing of illiquid securities and general market efficiency.

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SAC, widely viewed as one of the most successful hedge fund groups, had its own share of bad publicity earlier this year in a CBS-TV "60 Minutes" report, in which small Canadian biotech company Biovail Corp. <BVF.TO> alleged SAC's short-selling activities manipulated and damaged its stock.

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But a media focus on a handful of frauds such as that involving Bayou Management, a collapsed Connecticut hedge fund, along with reports of hedge fund managers' lavish lifestyles, has given the industry a negative image that isn't being offset by positive comment, industry officials said.

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I only wish the media would focus on Bayou Management!

Bayou and the Bush Cousin

A first cousin of President Bush is emerging as a peripheral player in the increasingly bizarre Bayou Management hedge fund scandal.

Sources say John P. Ellis, a former journalist turned investment banker, represented several companies in investment presentations to IM Partners, a side venture set up by Samuel Israel and Daniel Marino. Israel and Marino were the management team that ran Bayou and who federal prosecutors allege defrauded investors out of $300 million.

People familiar with the Bayou saga say Ellis, a personal friend of Israel for the past several years, helped arranged at least five investment deals for IM Partners while working as a managing director for GH Venture Partners, a New York City-based investment bank. In all, IM Partners, a Connecticut-based investment partnership, invested at least $25 million in deals handled by GH Venture.

There's no indication that Ellis or GH Ventures were direct or indirect investors in either Bayou or IM Partners. And, other than their common principals, there's no direct evidence that any relationship existed between IM Partners and Bayou, although both operated out of the same Stamford, Conn., office.

A former columnist for the Boston Globe, Ellis may be best known for his work as an electoral consultant for Fox News during the 2000 presidential election. It was Ellis' analysis of the Florida vote total that led Fox to declare Bush the victor before any of the other networks.

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