Previously barred from any form of mass-market advertising, hedge funds can now offer their wares to the general public as a result of the passage of the JOBS Act, Jump-Start Our Business Start-Ups.
There is a fear among observers that this new development will not serve the public well, but will rather end up confusing consumers even more than they already are concerning the specialized universe of hedge funds.
One problem is that the term ‘hedge funds’ signifies a wide variety of investment vehicles, and this fact might be obscured in the slick world of fast-paced, sound-bite focused, advertising. Another problem is that although only the wealthiest investors are allowed to invest in hedge funds, those referred to by the SEC as “accredited investors,” they can still be susceptible to the misleading or otherwise not completely clear advertising which will be aimed at them.
Steve Lockshin, co-founder with Charles Goldman of Advizent, a new company which is dedicated to helping consumers understand their investment options, says that even “accredited investors” can easily become “accredited suckers.”
Charles Goldman explained:
"If hedge funds begin to advertise, wealth managers, and other trusted advisors must begin educating their clients now. Not all funds are bad. Many are excellent. Advisors understand the differences and must be prepared to respond to their clients when they see the latest ads."