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Why Regulating Hedge Funds?

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  • Michel Aglietta

Abstract

The risks of hedge funds are embedded in their strategies in the pursuit of high performance. A combination of leverage and dependence on market liquidity makes them vulnerable to financial crises. Their reactions under stress can cause the spread of systemic risk. This is why the indulgent attitude traditionally adopted by regulators is changing. Registering hedge fund managers, limiting leverage, disclosing specific information about the risks they take and making management fees less twisted against investors are legislative proposals currently being discussed.

Suggested Citation

  • Michel Aglietta, 2010. "Why Regulating Hedge Funds?," La Lettre du CEPII, CEPII research center, issue 296.
  • Handle: RePEc:cii:cepill:2010-296
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    File URL: http://www.cepii.fr/PDF_PUB/lettre/2010/let296ang.pdf
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    Keywords

    Hedge Funds; Crisis;

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