Hedge Fund Structure, Regulation, and Performance around the World

A recurrent concern shared by market participants and regulators around the world is that the increasing size of the hedge fund industry coupled with potential agency problems, activist investment practices and herding behavior may exacerbate financial instability. Having said that, although it is frequently suggested that hedge funds are unregulated, hedge funds are in fact regulated at least to some degree in every country around the world. It is therefore worthwhile to consider such differences in legal and institutional settings across countries as they directly affect the structure, governance and performance of hedge funds. In this book, we consider international data including data from the US, Asia and Europe, to gain a significant amount of insight into how hedge funds operate on a global basis. While hedge funds are hardly regulated in the US, other jurisdictions implement different and sometimes more onerous sets of regulatory requirements. As explained in the book, international differences in hedge fund regulation include, but are not limited to, minimum capitalization requirements, restrictions on the location of key service providers and different permissible distribution channels via private placements, banks, other regulated or non-regulated financial intermediaries, wrappers, investment managers and fund distribution companies. Essentially, hedge fund regulatory structures differ across jurisdictions, so maybe we should not tar and feather all hedge funds with the same brush.