The post-crisis EU regulation targeting hedge funds

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

  1. 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”