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Regulation: Threat or Opportunity for the Funds of Hedge Funds Industry?

Author

Listed:
  • Serge Darolles

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Mathieu Vaissié

Abstract

A tidal wave of regulation is hitting financial markets worldwide as a result of the credit crisis of 2008–2009 and this time around the hedge fund world will not be immune. We argue in this chapter that, unlike conventional wisdom, regulation could be an opportunity for the funds of hedge funds (FoHFs) industry. The only necessary condition is fair treatment of hedge fund investments. We take the Solvency II framework as an example and show how the implementation of the granularity adjustment, first introduced for implementation in the Basel framework, makes it possible to take into account the diversification potential of FoHFs and in turn reconcile the outcome of the standard formula with empirical evidence.

Suggested Citation

  • Serge Darolles & Mathieu Vaissié, 2013. "Regulation: Threat or Opportunity for the Funds of Hedge Funds Industry?," Post-Print hal-01632889, HAL.
    • Handle: RePEc:hal:journl:hal-01632889
    DOI: 10.1016/B978-0-12-401699-6.00028-9
    as

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