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

Serge Darolles and Mathieu Vaissié

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Abstract: 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.

Keywords: Risk; FoHFs industry; Regulation; financial markets (search for similar items in EconPapers)
Date: 2013
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Published in Reconsidering funds of hedge funds : the financial crisis and best practices in UCITS, tail risk, performance, and due diligence, pp.481-493, 2013, ⟨10.1016/B978-0-12-401699-6.00028-9⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01632889

DOI: 10.1016/B978-0-12-401699-6.00028-9

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