Is “regulation of hedge funds” a contradiction in terms?

Jul 23rd, 2008 | Filed under: Academic Research, Hedge Fund Regulation | By:
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Yesterday, we discussed a recent article by a legal scholar that argues in favour of allowing US retail investors to buy hedge funds.  Less SEC oversight would likely shift more of the onus on the industry to police itself.  The recent release of recommendations from the President’s Working Group on Financial Reform in the US (see related posting) and the Hedge Funds Working Group in the UK both represent a step in this direction.  But will the be enough to placate government concerns.  Today, we cover an award-winning article that says “no”.

Hedge Fund Self-Regulation in the US and UK by Harvard Law School student John Horsfield-Bradbury was the recent winner of the 2008 Victor Brudney Prize in Corporate Governance for “the best student paper on a topic related to corporate governance”.  Horsfield-Bradbury questions the ability of the industry to police itself, arguing that “self-regulation will not necessarily result in any efficiency gains as government regulators will remain the ultimate drivers of any regulation.”

Horsfield-Bradbury sees hedge funds as a regulatory, not an investment phenomenon…

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