Hedge Funds: What Do We Really Know?

Economic Issues, September 27, 1999

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Hedge Funds: What Do We Really Know?

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Bibliographic details

• Authors: Barry J. Eichengreen, Donald J Mathieson
• Published: September 27, 1999
• Series: Economic Issues
• DOI: https://doi.org/10.5089/9781557758491.051

Overview and purpose

• Authors: Barry J. Eichengreen, Donald J Mathieson
• Date: September 27, 1999
• Purpose: Discuss the size, number, and investment styles of hedge funds; analyze their interactions with global financial markets; review the present state of their supervision and regulation; and assess suggestions for closer regulation as part of broader financial-market regulatory approaches.

Historical episodes highlighted

• 1992: Hedge funds implicated in crises that led to major exchange rate realignments in the European Monetary System.
• 1994: Hedge funds implicated after a period of turbulence in international bond markets.
• 1997: Concerns about hedge fund roles following financial upheavals in Asia.
• 1998: Amplified concerns with allegations of large hedge fund transactions in various Asian currency markets and the near collapse of a major hedge fund, Long-Term Capital Management (LTCM).

Major themes and substantive findings

• Size, number, and investment styles of hedge funds:
  • The paper discusses hedge funds' size, number, and investment styles (no aggregate numeric totals provided on the landing page).
• Interactions with global financial markets:
  • The paper examines how hedge funds interact with global financial markets and how episodes of volatility draw attention to their market role.
• Supervision and regulation:
  • Reviews the present state of hedge fund supervision and regulation as of publication.
  • Assesses various suggestions for regulating hedge funds more closely, often within broader regulatory approaches to financial markets.
• Case study emphasis:
  • The Long-Term Capital Management (LTCM) episode is used as a focal example of systemic concern.

Subject classifications and keywords

• Subject: Banking, Commercial banks, Financial institutions, Hedge funds, Mutual funds, Securities, Stocks
• Keywords: Commercial banks, EI, forward sale, fund, Global, hedge fund, hedge fund customer, hedge fund strategy, hedge fund's loss, Hedge funds, hedge funds' activity, institutional investor, investment activities of a hedge fund, Long-Term Capital Management, LTCM episode, LTCM rescue, LTCM situation, managed futures, market, Mutual funds, regulation of the hedge fund industry, Securities, Stocks, total borrowing