The global financial system is on life support. The credit crisis that began in the U.S. subprime mortgage market nearly two years ago has become a pandemic, taking down banks, brokerage firms, insurers and other institutions caught in its path. In response governments around the world have injected trillions of dollars, propping up troubled companies as they try to avoid a repeat of the Great Depression. This massive effort comes at time when the U.S. has just elected a new president, European countries are scrambling to deal with soaring unemployment and frozen credit markets, and Asia is fighting to keep its economies from joining the West’s in recession.
Hedge funds have not been immune to the crisis. For the first 11 months of 2008, the benchmark HFRI composite index was down nearly 18 percent, with some funds plummeting two to three times that. Not surprisingly, the industry is looking at potentially massive redemptions. No less an authority than George Soros estimates that the $2 trillion managed by hedge funds at the start of 2008 could shrink by as much as 75 percent.
Even without such dire predictions, hedge fund managers are staring at the almost certain prospect of increased regulation. “Nearly all financial market participants face the likelihood of new or increased regulation,” says Roger Hollingsworth, managing director in charge of government relations for the Managed Funds Association, which represents the hedge fund industry in Washington, and a former senior policy adviser to Connecticut Senator Christopher Dodd. Regulation will take different forms in different parts of the world. In this special report we look at the major regulatory issues facing hedge fund managers in Asia, Europe and the U.S. and the likely outcomes in each region. In a world of increasing uncertainty, change, it seems, is the only sure thing.
Click on the article titles below to read our special report series exploring how different parts of the world are addressing hedge fund regulation issues.
United States: The Usual Suspects
With Washington in an uproar over Wall Street’s meltdown, hedge fund managers are already being hauled in for questioning. Regulation and more taxation are inevitable; what they fear is everything else.
Europe: Flirting With Unity
Hedge fund managers coming to Europe may soon need a regulatory passport that will require far greater reporting and disclosure.
Asia-Pacific: What Asian Contagion?
Asia-Pacific regulators, especially in Australia, Hong Kong and Singapore, see little reason to clamp down on hedge funds.
