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

Darolles, Serge; Vaissié, Mathieu (2013), Regulation: Threat or Opportunity for the Funds of Hedge Funds Industry?, in Brown, Stephen J.; Gregoriou, Greg N., Reconsidering funds of hedge funds : the financial crisis and best practices in UCITS, tail risk, performance, and due diligence, Academic Press : Oxford, p. 481–493. 10.1016/B978-0-12-401699-6.00028-9

Type
Chapitre d'ouvrage
Date
2013
Book title
Reconsidering funds of hedge funds : the financial crisis and best practices in UCITS, tail risk, performance, and due diligence
Book author
Brown, Stephen J.; Gregoriou, Greg N.
Publisher
Academic Press
Published in
Oxford
ISBN
978-0-12-401699-6
Number of pages
545
Pages
481–493
Publication identifier
Metadata
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Author(s)
Darolles, Serge
Dauphine Recherches en Management [DRM]
Vaissié, Mathieu
Abstract (EN)
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.
Subjects / Keywords
Risk; FoHFs industry; Regulation; financial markets
JEL
D81 - Criteria for Decision-Making under Risk and Uncertainty
G18 - Government Policy and Regulation
G11 - Portfolio Choice; Investment Decisions