publication . Article . 2007

The evolution and regulation of hedge funds.

Crockett, A.;
Open Access
  • Published: 01 Jan 2007 Journal: Financial stability review, issue 10 April, pages 19-28
Abstract
Hedge funds have attracted increased attention in recent years. In part, this is because investment in hedge funds is becoming “mainstream”. A wider range of investors has sought exposure to these investment vehicles, and this has been associated with rapid growth in both the number of funds and the volume of assets under management. In part, too, greater attention has been the result of worries that hedge funds could in some circumstances exert a destabilizing infl uence. With the growth in the market share of hedge funds, and their greater “visibility” in the market place, concerns have been expressed about the consequences of limited transparency and lack of ...

1990 1992 1994 1996 1998 2000 2002 2004 2006 Funds (left-hand scale) Estimated assets (right-hand scale)

1 Hedge Fund Research, Inc., © HFR, Inc., January 2007, www.hedgefundresearch.com.

2 Hedge Fund Research, Ibid.

3 Macro funds attempt to identify inefficient pricing in stock markets, interest rates, foreign exchange rates, and physical commodities. Their top-down approach concentrates on understanding how global macroeconomic and political events affect the valuations of financial instruments; they tend to have broad investment mandates that allow them to hold positions in practically any financial instrument in any market.

4 Fung (W.) and Hsieh (D. A.) (2000): “Measuring the market impact of hedge funds”, Journal of Empirical Finance, vol. 7, pp. 1-36.

2001 2002 2003 2004 2005 2006 USD classified held by US and foreign banking organizations USD classified held by nonbanks Nonbanks' share of total classifications (right-hand scale)

23 Steel (R. K.) (2007): “Remarks of under secretary for domestic finance Robert K. Steel on private pools of capital,” February 27.

24 Ferguson (R.) (2006): “Financial regulation: seeking the middle way,” Fourth Joint Central Bank Research Conference on Risk Management and Systemic Risk, Frankfurt, Germany, November.

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