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Hedge Funds and their (Non)regulation

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  • Petr Musílek

Abstract

The objective of this contribution is not only to explain the position of institutional investors on global capital markets, but also evaluate their impact on the operation of financial systems. The core of this contribution is dedicated to hedge funds that in the period before the outbreak of global financial crisis were not subjected to almost any regulation, except for some dishonest practices. Institutional response to the global financial crisis however changed significantly the regulatory-supervisory approach also to hedge funds. The Dodd-Frank Act introduced quite promptly sensitive registration of important investment managers of hedge funds in the USA. At the same time, the new American financial legislation passed the duty for managers of hedge funds and other private funds to keep prescribed records. On the other hand, the European directive on managers of alternative investment funds has a very restrictive nature, because it implements a standard license system, costly internal and external control mechanisms, and increases inadequately powers of supervisory authorities.

Suggested Citation

  • Petr Musílek, 2012. "Hedge Funds and their (Non)regulation," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2012(2), pages 7-23.
    • Handle: RePEc:prg:jnlefa:v:2012:y:2012:i:2:id:7:p:7-23
    DOI: 10.18267/j.efaj.7
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    References listed on IDEAS

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    1. Fung, William & Hsieh, David A., 2000. "Performance Characteristics of Hedge Funds and Commodity Funds: Natural vs. Spurious Biases," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(3), pages 291-307, September.
    2. Mr. Stijn Claessens & Mr. Luc Laeven & Ms. Deniz O Igan & Mr. Giovanni Dell'Ariccia, 2010. "Lessons and Policy Implications from the Global Financial Crisis," IMF Working Papers 2010/044, International Monetary Fund.
    3. Rodrigo Cifuentes & Hyun Song Shin & Gianluigi Ferrucci, 2005. "Liquidity Risk and Contagion," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 556-566, 04/05.
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    More about this item

    Keywords

    Alternative investment funds managers; Global financial crisis; Hedge funds; Institutional investors; Regulation and supervision;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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