Hedge fund managers should expect regulation of their secretive trillion-dollar sector to increase, according to experts speaking at the MARHedge World Wealth Summit yesterday.

?The simple answer from the regulatory front is more, more, more?,? said Richard Marshall, a former US Securities and Exchange regulator, now in private practice as a partner with law firm Kirkpatrick & Lockhart Nicholson and Graham.

Mr. Marshall and a panel of other industry experts spoke yesterday on fund management in a ?perilous investment climate? to delegates of MAR?s annual conference, which has attracted hundreds of high net-worth investors, fund managers, fund administrators and other support providers to Bermuda this week to discuss the issues facing an industry that now has trillions of dollars in assets under management.

Hedge fund managers in the US are facing the new requirement of having to register with the SEC, with all registrations due by December 17. The new law goes into effect from February next year, to be put on all except those hedge fund managers that are approved for short-term exemptions.

SEC chairman Christopher Cox yesterday said the new rule would go ahead, after some in the industry had called for it be repealed even before going into effect (See story on Page 14).

Mr. Marshall, who oversaw 70 inspection staff while at the SEC, said the trend towards more regulation is global and that greater hedge fund oversight is already in place in some jurisdictions outside the US.

Gary Vaughan-Smith, head of alternative investments for ABN Amro Asset Management in London, said the UK Financial Services Authority already requires hedge fund managers to be registered.

?It really is not an issue?, said Mr. Vaughan-Smith, whose unit specialises in hedge fund investments, with $1.5 billion of its $2.5 billion in assets under management invested in fund that invest in hedge funds, called fund of funds.

But Alan Quasha, president of New York-based Quadrant Management Inc., said while regulations on the table from the SEC aren?t seen as challenging the freedoms hedge fund managers have, of more concern is ?creeping legislation?, or a continuing trend toward greater regulation.

The new rule requiring hedge fund managers to register with the SEC also lays the way for the US securities watchdog to conduct company inspections.

Mr. Marshall said regulatory reach could also expand into the private equity sector.

?This is part guesswork but I?m the type to hang out with regulators and this is the noise: Regulators are kind of wondering why don?t we regulate private equity fund managers just like hedge fund managers.?

As well, some in the industry are testing the waters on the feasibility of forming a self-regulatory vehicle, he said, similar to the National Association of Securities Dealers, an association of brokers and dealers in the over-the-counter securities business.

?This would create another regulator, and more regulation,? Mr. Marshall said.

Mark Garber, president of Connecticut-based Aetna Capital Management LLC, said the regulations about to be adopted will have ?little effect? on fraud in the industry because it isn?t a real problem at present.

The hedge fund industry, in the past, has seen a number of high-profile failures because of alleged fraud by hedge fund managers. Last month, Connecticut hedge fund Bayou Management LLC collapsed, and is now under investigation by the SEC.

Mr. Garber said while the registration requirement is ?troublesome? because it will require more paperwork, and will result in higher fees, it otherwise has ?far less [impact than one might be led to believe?.

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