Hedge Fund Reader : Hedge funds need more transparency and better regulations

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March 21, 2006

Hedge funds need more transparency and better regulations

Investing in hedge fund? Well, you might have certain apprehensions that most investors have when they are looking at this investment tool.

Essentially any tool that offers high returns, also entails high risk. So this makes it imperative for you to ensure that you pick the right hedge fund manger as that is what would decide the future of your investment. Ideally you should pick a hedge fund manager who can manage and control risk in a manner that ensures that you don’t go into losses, even if the returns are not high.

Also, in most markets, the investment areas are now overcrowded. As a result, these areas are vulnerable to quick falls. This can be detrimental and can lead to sudden losses.

The requirement at this stage is a higher degree of regulation in the hedge fund market. This would ensure higher transparency so that an investor knows exactly where his money is going. Also, with better regulation, hedge fund managers would also become more accountable. At the same time it would become much simpler for an investor to research the background of a hedge fund manager before entrusting his money into their hands.

I believe that with these basic prerequisites in place, the hedge fund market would be much safer and as a result would attract a larger number of investors.

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March 21, 2006 in Regulation | Permalink