Hedge Fund Report: Activists Don't Always Shout

As a result, the stock is in growth mode, despite Friday's slide. Since the beginning of the year, share prices are up by almost 260%. Loeb himself pocketed 21% in profits since he purchased his shares at the end of April.

Valuation is rich -- the stock trades 29.5 times next year's earnings estimate of $1.05 cents a share. Yet some say it's justified by the company's outlook. "The stock is growing really fast and it deserves a higher multiple," Gregozeski says. On May 11, shares moved up 24% after the company posted its first operating profit in seven years.

Zoltek is seemingly one of those stories in which even activist investors can be quiet and patient.

No More Regulation

Hedge funds have been on the radar screen of the Securities and Exchange Commission. But last week, it was time for the Senate and Federal Reserve to pay a closer look.

Fortunately for managers, the conclusion of hours of discussion was that hedge funds do not need to be further regulated. Whether this is a good or bad thing for individual investors remains to be seen.

"Direct regulation may be justified when market discipline is ineffective at constraining excessive leverage and risk-taking, but in the case of hedge funds, the reasonable presumption is that market discipline can work," said Fed Chairman Ben Bernanke, speaking about hedge funds and risk at a Federal Reserve Bank of Atlanta's conference in Sea Island, Ga.

Bernanke followed in the footsteps of his predecessor Alan Greenspan, who was never in favor of regulation during his tenure. Speaking last week at the Bond Market Association's 30th anniversary reception, Greenspan reiterated that he opposed the regulation of hedge funds because it would hamper market efficiency.

Separately, regulators and industry experts met last Tuesday at a U.S. Senate Subcommittee hearing and talked about the role of hedge funds in capital markets. The consensus was that the best regulator for hedge funds is the marketplace.

Adam Lerrick, professor of finance at Carnegie Mellon University, said at the hearing that the overall level of leverage in the market should be made public. Randal Quarles of the Department of Treasury stressed that leverage, concentrated positions, and valuation pose the greatest risks in hedge fund investing. But overall, the credo was: Live and let live.