Heine said that requiring hedge funds to register with the commission "will not have any effect on the suitability requirement for hedge fund investors."
Even within the context of traditional stock and bond investing, hedge funds sometimes seek out esoteric niches, such as interest rate swaps and collateralized mortgage obligations, according to Todd Goldman, managing principal at Walnut Creek, Calif., accounting firm Rothstein Kass, which serves hedge funds.
"The whole point of hedge fund investing is the ability to specialize," Goldman said, pointing out that there are hedge funds producing steady returns that strictly invest in credit card debt and funds that invest in tax liens.
To date, specialization among hedge funds has meant inventing new investment strategies within a core group of publicly traded securities -- stocks, bonds, currencies, futures and options. But some investors are expanding beyond what most people would even consider investments.
Billionaire Mark Cuban, owner of the NBA's Dallas Mavericks, for example, said in November that he is preparing to launch a hedge fund focused on gambling.
"This hedge fund won't invest in stocks or bonds, or any type of business. It's going to be a fund that only places bets," Cuban said in a posting on his Web log, MarkCuban.com.
He promised in his posting to hire top professional gamblers to figure out what bets to place or what games to play. Their performance of gambling wins and losses, of course, will generate the return for investors, Cuban said. He declined to comment further on his hedge fund plans in response to an e-mail message from The Washington Post on the subject.
Some funds already invest in the gaming sector, albeit through trading shares of companies operating in that industry. The Vice Fund, based out of Texas, for example, is a mutual fund that invests only in companies with ties to weaponry, smoking, drinking and gambling.
Other funds take great pains to avoid so-called "sin" stocks. Shariah Funds, managed by Meyer Capital Partners of New Canaan, Conn., invests according to Islamic law, avoiding companies associated with gambling, alcohol, tobacco and food processing (because of dietary restrictions).
"We look at a company's primary business first, and then we look at their financials," said Sheikh Yusuf Talal DeLorenzo, an Islamic scholar and adviser to the fund.
