Tiago Ventura Mendes,
LL.M. in European Banking and Financial Law, University of Luxembourg
LL.M. Candidate in International Financial Law, King’s College London
- The politically driven rationales to regulate hedge funds.
It is generally agreed that modern hedge funds have made their appearance around 60 years ago when Alfred Winslow Jones, a financially educated journalist, decided to invest in stock amalgamating long and short positions.[1] A hedge fund can be considered as being “any pooled investment vehicle that is privately organized, administered by professional investment managers, and not widely available to the public”.[2] The term “hedge” leads one to believe that one important characteristic of those funds is the usage of certain financial instruments for hedging purposes[3] in addition to engaging in other trading strategies seeking to protect themselves from adverse market movements[4]. They invest very actively in liquid public markets while using short-term investment strategies and sophisticated investment techniques as derivatives trading and short-selling but also enter in heavy leveraged transactions.[5] Hedge funds have been seen as playing fundamental roles in the market as contributing to market efficiency, promoting well-functioning corporate governance, unveiling fraudulent scandals and agitating boardrooms as active investors[6]. Continue reading “The post-crisis EU regulation targeting hedge funds”