Hedge Funds

This book offers insights into hedge funds, discussing their risks, regulatory challenges, and the economic realities underpinning their operation. Hedge Funds is essential for understanding these investment vehicles.

This inaugural volume of the Institute for Law and Finance Series presents the proceedings from the ILF/DAI May 2003 conference titled Hedge Funds: Risks and Regulation. The collection features discussions on the economic characteristics of hedge funds, alongside regulatory strategies to address their unique challenges. In recent years, the hedge fund industry has seen significant growth, particularly following the market downturn of 2001. While these funds can provide opportunities for investors during volatile markets, the term 'hedge' can be misleading, as they often rely on speculative investment techniques and do not necessarily offer a safe buffer against risk.

The conference brought together prominent scholars, lawyers, and bankers to evaluate the risks and regulatory hurdles posed by hedge funds. At the time, German lawmakers were actively deliberating the necessity of new legislation, which ultimately led to the German Investment-Modernization Act that took effect on January 1, 2004. This new law aimed to enhance the appeal of hedge fund products within the German market, reflecting a growing international concern regarding the regulation of these investment vehicles.

The volume includes insightful papers that explore hedge funds from various angles. Notably, Alexander M. Ineichen debunks common myths surrounding these funds, while Franklin R. Edwards emphasizes the importance of aligning regulations with the economic realities of hedge funds. Additionally, contributions from experts in the U.S., U.K., and Germany provide a comprehensive overview of the existing regulatory frameworks, culminating in a detailed analysis of corporate structures employed by German hedge funds. Through Hedge Funds, readers gain a nuanced understanding of the complexities surrounding this dynamic sector.