At a time when regulation and control, checks and processes, policy and procedure are the words on every politician's breath, hedge funds are positively welcoming an almost voluntary code of regulation to continue their acceptance in the financial world especially at a retail level. Many are working closely with regulators to forge practice that is both acceptable and practical, and could place them on the same regulatory level as mutual funds. Hedge funds are keen to develop a best practices guide that would incorporate a know your customer regime and this may be available this month. The drive is being spearheaded by the Managed Funds' Association, which has taken hedge funds into its fold. There are now close to 6,000 funds and most are offshore. How well received the guidelines will be is a point of contention. Many feel that in the current environment, they have little choice if they are to appeal to clients and lawmakers alike. Most hedge funds have a limited amount of customers so compliance with the USA Patriot Act would not be onerous – collating clients' names, addresses, nationalities and filing suspicious activity reports would do the trick nicely. Some funds are already doing this and have stopped offering nominee accounts, but others resist the concept feeling that such an invasion of privacy will be bad for business. The fear is that hedge funds will be asked to look through their intermediaries to their underlying clients, which would have cost implications that they are not keen on carrying. This drive for acceptability is designed to allow the funds to get access to less sophisticated investors. Hedge funds are subjecting themselves voluntarily to levels of disclosure and oversight that are normally applied to mutual funds and all in the quest to capture a new client market. The mass affluent fall into this category and restrictions on the number of investors they have as well as the types (retirement plans suddenly become attractive as client accounts) become the reward. Minimum investment levels suddenly drop from $500,000 and $1m to $25,000. New products are emerging that invest in a range of hedge funds and are in fact closed-end mutual funds. These products are being labelled as 'registered hedge funds'. Disclosure is annual and semi-annual, and annual reports are audited. They do not look through the hedge funds they invest in to report the underlying of holdings of such funds however. They also have directors or representatives designed to be guardians for investor interest. Management fees are considerably higher than those paid for mutual funds, and they are also two-tiered with a fee applicable to the total portfolio level: norm might be one per cent of assets and 20 per cent of investment profits. These funds are not exchange traded and do not issue and redeem shares each day. Investors can usually only deal in them once a quarter or semi-annually. Net asset value is calculated once a month. The rise of the hedge fund industry will inevitably result in more and more hedge fund products being registered with the Securities and Exchange Commission as closed-end funds so that lower minimum investments and unlimited investor numbers can be exploited. It will not be long before they also use public offerings to market such products, as opposed to private placements, which avoid SEC registration requirements and the need to produce detailed prospectuses. Funds can then be advertised like a mutual fund is currently and without the net-worth test that applies to private placements.