Business Funding

The industry of hedge funds has gained vast popularity over the lasts few years and the market is getting over-crowded with each passing day. Because of these reasons, it has become more necessary to implement higher degree of regulations in the market.

Basically, hedge funds are very much like the mutual funds, except the fact that the hedge funds are much less regulated. Hedge funds are reticent which means that they are made by private individuals and do not need to be known to other companies or even government. Due to this, hedge funds are free from most of the regulations that are adhered to by the mutual funds market.

Because of the non-regulation of investments in hedge funds, big companies are able to move undisclosed amounts, while gaining significantly without the notice of the authorities. Because of this reticent nature of the hedge funds, they are looked upon by the investors as risky, speculative and unethical.

Owing to the high price tags of the hedge funds and the extravagant amounts of money need to purchase them initially, most people think that it is not wise to put money into the hedge funds market. Therefore, there is a need to make this market more regulated, so that a higher level of transparency is ensured and investors know exactly where their money is going. In addition to that, regulated market will produce more hedge fund managers and investors will be able to simply research the manager’s background before entrusting the money into their hands.

Because there is very less regulation in the hedge funds market, there are very little official statistics. Because most of the hedge funds are owned by big companies, very little is made known about the financial moves made by them. Hedge funds are seen with even more suspicion because they are based in the offshore jurisdictions. For example, while mutual funds are based in big cities such as New York, the hedge funds are based in the places such as Bermuda, Virgin Islands and Cayman Islands.

Hedge funds market also has a higher rate of failure and it has been seen that a large percentage of them fail by the 2^nd or 3^rd year of operation itself. This vulnerability of the hedge funds to quick fall can be brought down by braining about better set of regulations in the market.

Thus, with proper regulations, the clouds of uncertainly and suspicion hovering over the hedge funds market can be cleared up, after which, a large number of investors will be attracted towards these investment solutions.