Time for a Serious Hedge Fund Ban

NEW YORK ( TheStreet) -- The lifting this week by the Securities and Exchange Commission of a ban on hedge fund advertising is largely meaningless, except that it provides a good opportunity to think about placing serious restrictions on who can invest in hedge funds and private equity funds.

The real danger from hedge funds is not that individual investors will get tricked into doing stupid things with their money. They always have and always will. The more serious problem is public pension funds doing so. A Bloomberg Businessweek story published Thursday is only the latest of many analyses to make the point that hedge funds don't generally outperform the market. And the fees many of them charge are outrageous.

Nonetheless, public pension funds continue to invest in them, despite the 2009 fury over "pay-to-play," which led to a sweeping internal review and indictments of former officials at CalPERS, the largest public pension fund in the U.S., and 20 months in prison for former New York State Comptroller Alan Hevesi, among other disgraces. If you think those events ended the ability of well-connected fund managers to win contracts with public pension funds, please send me an email, as I have a hot new hedge fund I'd like you to invest in. I can assure you the fees are low, and I'll be happy to let you keep at least half of any returns I make.

But seriously, there's nothing wrong with hedge funds advertising all they want. We just shouldn't let them fleece our governments.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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