Hedge funds and Private Equity - PES
Hedge funds and Private Equity - PES
Hedge funds and Private Equity - PES
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Insufficient supervision of operational risks <strong>and</strong> insufficient internal control. This is the question<br />
of inadequate validation of illiquid <strong>and</strong> complex assets held by hedge <strong>funds</strong>.<br />
Mis-selling of the sale of inappropriate alternative projects to insufficiently informed clients.<br />
<strong>Hedge</strong> <strong>funds</strong> have shown very impressive growth over recent years <strong>and</strong> have developed into a<br />
very important alternative investment instrument – for good <strong>and</strong> sadly also for the less good. The<br />
international character of the hedge fund industry <strong>and</strong> its unregulated nature, challenges our<br />
societies <strong>and</strong> authorities.<br />
The possible implications of hedge <strong>funds</strong> for the stability of the financial systems are not only a<br />
problem for the hedge <strong>funds</strong> – the far-reaching consequences in case of a risk being realised will<br />
hit corporate industries, employment, <strong>and</strong> investments as well as pensioners’ savings.<br />
All in all, there is a central argument for reducing risks associated with the increasing role of hedge<br />
<strong>funds</strong> in the financial system. Given the case for regulating banks <strong>and</strong> investment banks <strong>and</strong> other<br />
financial actors – we must ask why should hedge <strong>funds</strong> <strong>and</strong> private equity be any exception? Given<br />
the readiness to reforms labour markets in all European macro economies as well as our goods<br />
markets – why should the new developments of the financial markets around hedge <strong>funds</strong> <strong>and</strong><br />
private equity be exempted? We can summarise this part of our analysis by saying there is a strong<br />
case for dem<strong>and</strong>ing transparency <strong>and</strong> disclosure – <strong>and</strong> a strong case for some sort of incentives/regulations<br />
to ensure against systemic risks, market abuse, risk to the governance of listed<br />
companies, risk of poor asset evaluation, <strong>and</strong> protecting insufficiently informed investors.<br />
Part I – <strong>Hedge</strong> <strong>funds</strong> <strong>and</strong> private equity <strong>funds</strong> – how they work<br />
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