Billionaire investor George Soros is turning his legendary hedge-fund firm into a $24.5-billion "family office," a move that would avoid regulatory oversight that many hedge funds face.
Soros is best known as a pioneer of the modern hedge fund and is among the best known investors today. His firm, Soros Fund Management LLC, has told clients that it would no longer manage outside investors' money and would return below $1 billion to them while managing the remaining approximately $24.5 billion, including funds owned by Soros and his family and their foundations - through a family office.
According to Soros's firm, it was parting ways with its chief investment officer after three years and people familiar with the matter said the firm had underperformed the market this year and last, losing 6 per cent so far this year after rising just 2.5 per cent last year.
Analysts say, the family-office move was an example of how financial firms were responding to the new Dodd-Frank regulatory requirements, a legislation that remains the source of considerable political pushback and intense industry lobbying.
The pending hedge-fund regulation is an outcome of the financial crisis and is aimed at enabling regulators monitor risks to markets based on hedge-fund trading. Though hedge funds individually cannot upend a market, the funds often make similar market bets using borrowed money that could magnify their bets. If funds invest in a deal that backfires, losses can significantly impact markets.
Under the new rules, hedge funds would be required to be registered with the Securities and Exchange Commission by March 2012.