Commonly Used Terms in Derivative Market
February 12, 2025
In the previous article, we discussed the concept of sports tourism. We have seen how sports tourism has a wide definition and includes many different types of travel activities. We can say that there is evidence to support the claim that the presence of sports leagues and franchises does lead to an increase in tourism […]
Commercial banks have been relying on a wave of digitization in order to provide the best-in-class service to their customers. They provide several services which allow their customers to shorten their credit to cash cycle. One such service which has been enabled by the advent of technology is called remote deposit capture (RDC). Remote deposit […]
Common size statements are not financial ratios. Rather they are a way of presenting financial statements that makes them more suitable for analysis. However, analysts always use them in conjunction with ratio analysis. In fact, financial analysts use common size statements as the starting point to help them dig deeper. Common size statements tell them […]
Modern startup enterprises seem to be focused on the media hype. The focus of the entrepreneurs is to raise enough funds so that they become newsworthy. Once the name of the startup starts appearing in the news, it is considered to be worthy by everyone including other investors, employees, and even customers. Hence, many startup […]
Bankruptcy proceedings are often long drawn processes. The reason behind this is simple. If a company has to come out of bankruptcy, it has to get all its creditors to agree to a reorganization plan. The creditors are divided into classes based on the seniority of their debt. Each class is then expected to vote […]
Technically, the term hedge fund does not exist. In fact, the term hedge fund applies to any fund which is sold to accredited private investors and does not have to follow through with the regulation process! Now, investment advisory is a highly regulated industry and there are several laws which have been passed to ensure compliance and minimize foul play.
However, hedge funds are immune to most of these laws. This is probably the reason why investors prefer them. However, of late, experts have been lobbying to bring this trillion dollar hedge fund industry under some sort of regulation.
In this article, we will have a closer look at some of the regulations that are avoided by the hedge funds as well as arguments in favor of and against bringing hedge funds under the purview of the Securities and Exchange Commission (SEC).
Also, they are exempted from other compliance procedure like submitting the details of their trade for oversight and approval, maintaining their record keeping in the prescribed manner and most importantly the limits on the amount of money that they can charge as fees.
Hedge funds have been blamed for several crises. Some prominent ones are the subprime mortgage crisis and the LTCM crisis. However, proponents of hedge funds believe that the funds have come a long way and given the new and better risk management practices, a catastrophic event triggered by hedge funds seems almost impossible.
America is the primary market for hedge funds today. However, these funds are also spreading to other regional financial centers like London, Hong Kong and even Singapore. If the American government insists on regulation, funds may move their business outside the nation and then only the tax authorities will be the real losers.
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