George Soros launches family office as regulatory pressure bites

Legendary investor George Soros is to close his hedge fund to outside investors and convert it into a family office as a result of new Securities and Exchange Commission rules.

Soros’ sons Jonathan and Robert, who are co-deputy chairmen of Soros Fund Management, said in a letter to investors that they will return money to outside investors by the end of the year.

SFM will then manage assets of the Soros family, worth around $25 billion, they said in the letter.

The family took the decision as a result of new financial regulations that would have made it necessary for the firm to register with the SEC by 2012.

According to the new SEC regulations, which were announced last month, private family offices will remain exempt from regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act only if they advise family clients, do not project themselves as investment advisers and are completely family controlled. Also, hedge funds with more than $150 million in assets need to be registered with the SEC.

Family offices have traditionally not had to register with the SEC under the Advisers Act 1940 as advisers with fewer than 15 clients were exempt, allowing wealthy families to maintain a much sought-after level of privacy. But the new SEC ruling has repealed this exemption.

The family said in the letter: “We have relied until now on other exemptions from registration which allowed outside shareholders whose interests aligned with those of the family investors. As those other exemptions are no longer available under the new regulations, SFM will now complete the transition to a family office that it began eleven years ago.”

SFM was founded in 1969 by Soros, who is much known for winning a $1 billion bet that the Bank of England would be forced to devalue the pound in 1992. He also started a charitable foundation called the Open Society Fund to promote democracy and education.