Hedge funds remain the most controversial vehicles of the alternative investment funds universe. Their opaque nature, alleged role in major crises around the world and perceived lack of investor protection have repeatedly led to calls for greater regulation. Yet despite its tremendous growth, the hedge fund industry is still shrouded in a veil of mystery largely due to the highly complex and dynamic trading strategies employed by hedge funds and the scarcity of information about them. For the first time in one comprehensive volume, this concise but thorough guide explains how hedge funds work, analyses risk, compares the European Union (EU) and United States (US) systems and proposes reforms to the European framework in order to improve its resilience.
Focusing on the contribution of the hedge fund industry to systemic risk, the author elucidates the complex world of hedge funds and the legal issues linked to it. The analysis proceeds as follows:
- introduction to the world of hedge funds – definition, main characteristics, organizational structure, investment strategies, and benefits;
- deeply informed exploration of the dangers posed by hedge funds;
- documentation and examination of the major incidents connecting hedge funds and financial crises;
- rationales for regulation of hedge funds;
- comparison of relevant legislative developments in the US and EU; and
- proposals for strengthening the current EU supervisory and regulatory framework.
Guiding legislation, such as the EU Alternative Investment Fund Managers Directive and the US Dodd-Frank Act, is analysed, along with topical issues such as hedge fund activism.
Because the direction that hedge fund regulation takes in the future has implications for the Eurozone and systemic risk in the wider financial system, this book will be of immeasurable value to professionals in both the legal and business communities. It will be welcomed by corporate lawyers, regulatory authorities, policymakers and academics in both business-related and finance-related disciplines.