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From Kirsten Bischoff, Opalesque New York:
The topic of hedge fund regulation has been a focus for over a year now, with the industry trying to measure both those regulations to be aimed directly on hedge funds and those leveled indirectly through broader financial market regulation.
Wild swings: regulatory pendulum and market reactions
As the financial crisis in the US deepened throughout 2008 and into 2009, the cry for financial market regulation gained strength.
A focus on trying to understand government policy is at the forefront of many managers’ risk analysis in this climate. “The government has the ability to change the rules of the game quickly,” says Dean Curnutt, President of Macro Risk Advisors, a New York-based derivatives strategy and transaction execution firm.
With rapidly implemented changes to financial regulation, such as the temporary halt on shorting certain financial equities, to the 90% bonus clawback on employees of firms in receipt of TARP funds, to the recent easing of FASB rules, markets now react to any whiff of new regulatory initiatives being contemplated in Washington DC.
Macro Risk Advisors, which has a large hedge fund client base, says hedge funds have found it necessary to evaluate possible regulatory changes immediately – even those suggested regulatory changes which are likely politically driven and unlikely to amount to actual legislation.
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