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AJ Stockwell
Professor Wolcott
ENC 1102
8 April 2015
Literature Review
Introduction
For this literature review I decided to look at the industry of hedge fund investments.
More specifically, I chose the regulation of the hedge fund industry. The purpose of this literature
review is to explore the different research done by members of the hedge fund discourse
community and to bring their ideas together. Also, I will be using their ideas to create a possible
area of research that could be explored in the future. To me, the hedge fund discourse community
includes anyone who invests in a hedge fund, anyone who manages a hedge fund, those
responsible for making laws that affect hedge funds and those who do research about hedge
funds. Hedge funds are a type of investment that few people are actually allowed to invest in. It
involves a hedge fund manager deciding what to do with the money that is placed into the fund
in order to try to make the most money possible. This is done by finding discrepancies in the
pricing of certain things or other more technical ways. My articles focus on the somewhat new
idea of placing more restrictions on hedge funds to keep them from affecting the entire economy
negatively or in order to protect the investors. For my sources, I chose academic articles that I
found through using the databases that UCF provides to its students. I chose articles that either
focused mainly on the United States or on hedge funds as a whole. Hedge funds are a somewhat
new type of investment, and because of this my articles are written within the last 20-30 years.

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My audience for this review would be anyone who is somewhat new to hedge funds or wants to
know more about the regulations being placed on hedge funds or the reasons behind those
regulations.
Hedge Fund Regulation
Hedge funds in the United States are structured in a way that they are able to avoid many
of the restrictions that are placed on other types of investments (Bianchi, Crenshaw, Kurdas,
Lewis, Mann, Morley, Summers). This lack of regulation has led to problems in the hedge fund
industry. Hedge fund managers have been able to get away with unethical tactics like lying to
their investors about the returns on their investments and making up numbers that werent true.
Recently, this has become a source of controversy in the hedge fund industry with many people
becoming concerned about this. Hedge funds are a very exclusive type of investment and anyone
willing to put their money into such a large fund does not want their investment to be risked
because of false reports.
The case for more regulations on hedge funds has been a large topic of discussion
recently and most people are in agreement that more regulations need to be placed on these types
of funds (Bianchi, Crenshaw, Edwards, Engert, Kurdas, Greupner, Jonna, Lewis, McClean,
Mann, Maris, Morley, Schwartz and Katz, Semmler and Chappe, Stulz, Summers and Verett).
There are many reasons that these people believe more regulations would be beneficial to the
hedge fund industry. Some believe that this would allow the hedge fund industry to gain a better
reputation than it has at the present moment. Others think that avoiding the shady tactics in the
hedge fund industry could improve the performance of hedge funds. Finally, experts say that
putting further regulations on hedge funds could help protect the people who invest in hedge
funds.

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One main purpose of the regulation is to protect the people that are investing in hedge
funds. (Bianchi, Edwards, Kurdas, Greupner, McClean, Semmler and Chappe, Summers).
Because hedge funds are such an exclusive type of investment, the protection of the investors is
vital to the success of hedge funds. As an investor, people would like accurate information and
reports when deciding what to do with their money, and if hedge fund managers are able to lie
about the actual state of the fund, investors may invest their money in something they otherwise
would not. Overall, people agree that investors should be protected by some type of regulation
when they invest their money and that hedge funds are not doing a satisfactory job of this.
The recent regulations placed on hedge funds recently are not necessarily doing their job.
(Bianchi, Jonna, Mallaby, Mann, Maris, Schwartz and Katz). While the regulations have changed
some things about hedge funds, many problems still remain. Experts say that imposing
regulations could cause hedge fund managers to employ even more sneaky tactics to get around
the regulations instead of just following the rules. Also, some experts say that hedge funds may
have a negative effect on the economy as a whole, and there has been no legislation up to this
point to solve this problem. Hedge fund regulation has started down the correct path, but more is
needed to fully fix all the problems in the industry.
Many experts agree that there are two different ways that the hedge fund industry could
be governed. One solution would be to let the industry regulate itself, and the other would be to
have direct government intervention by the US Securities and Exchange Commission (Bianchi,
Crenshaw, Edwards, Engert, Kurdas, Greupner, Jonna, Lewis, McClean, Mann, Mallaby, Maris,
Morley, Schwartz and Katz, Semmler and Chappe, Stulz, Summers and Verett). Up until recently,
the hedge fund industry had been allowed to regulate itself. However, according to many experts,
it seems that the hedge fund industry is failing to regulate itself in a way that is beneficial for

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everyone involved. This has caused the argument for government intervention to increase in
popularity recently. The problem with this type of intervention is that the experts cannot agree on
what the best way to go about it is.
Research Gap
One question that arises from these recent regulations is whether or not this has
discouraged people from investing in hedge funds. A lot of the legislation is aimed at protecting
investors, but could it possibly be turning them off from investing? Hedge funds are known for
having huge successes and huge failures. Placing regulations on them could take away some of
the appeal that they have with investors who are just looking to make a huge profit. While it may
encourage a sensible investor, it could turn away a risky investor just looking to hit it big. I think
the relationship between hedge fund regulation and investor participation should be further
explored.
Project Proposal
In order to explore this relationship, I would create a survey that would be distributed to
potential investors through a certain medium. For this survey I would try to make sure the
investors were actually knowledgeable about investing by asking them about their past
investments, or experience with investing. Then, the survey would ask whether or not hedge fund
regulation has affected their willingness to invest in them. To distribute this survey, I would use
an economic publication such as the Wall Street Journal. I think this would be a good way
because people interested in economics read it, but not all the readers are interested in hedge
funds specifically. I believe that this research is important because hedge funds could be an
important part of the economy even if people are not completely aware of it and the loss of

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investments into these types of funds could cause the economy take crash again. I think it is
important to make sure the hedge funds are regulated, but not in a way that discourages many
people from investing in them.

Works Cited
Bianchi, Robert J., and Michael E. Drew. "Hedge Fund Regulation and Systemic Risk." Griffith
Law Review 19.1 (2010): 6-29. Academic Search Premier. Web. 18 Mar. 2015.
Crenshaw, Jay. "Hedge Funds: Regulatory, Tax, And Organizational Considerations." Florida
Journal Of International Law 18.1 (2006): 359-412.
Edwards, Franklin R. "Hedge Funds And Investor Protection Regulation." Economic Review
(07321813) 91.4 (2006): 35-48. Academic Search Premier. Web. 2 Mar. 2015.
Engert., Andreas. "Transnational Hedge Fund Regulation." European Business Organization Law
Review 11.3 (2010): 329-378. Academic Search Premier. Web. 2 Mar. 2015.
Kurdas, Chidem. "Does Regulation Prevent Fraud?: The Case Of Manhattan Hedge Fund."
Independent Review 13.3 (2009): 325-343. Academic Search Premier. Web. 2 Mar. 2015.

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Greupner, Erik J. "Hedge Funds Are Headed Down-Market: A Call For Increased Regulation?."
San Diego Law Review 40.4 (2003): 1555-1596. Academic Search Premier. Web. 18
Mar. 2015.
Jonna, Paul M. "In Search Of Market Discipline: The Case For Indirect Hedge Fund Regulation."
San Diego Law Review 45.4 (2008): 989-1036. Academic Search Premier. Web. 18 Mar.
2015.
Lewis, Matthew. "A Transatlantic Dilemma: A Comparative Review of American and British
Hedge Fund Regulation." Emory International Law Review 22.1 (2008): 347-383.
Academic Search Premier. Web. 2 Mar. 2015.
Mallaby, Sebastian. "Hands Off Hedge Funds." Foreign Affairs 86.1 (2007): 91-101. Academic
Search Premier. Web. 18 Mar. 2015.
McClean, Alex R. "The Extraterritorial Implications Of The Sec's New Rule Change To Regulate
Hedge Funds." Case Western Reserve Journal Of International Law 38.1 (2006): 105139. Academic Search Premier. Web. 18 Mar. 2015.
Mann, Simeon G. "Too Far Over The Hedge: Why The Sec's Attempt To Further Regulate Hedge
Funds Had To Fail & What, If Any, Alternative Solutions Should Be Considered." St.
John's Law Review 82.1 (2008): 315-357. Academic Search Premier. Web. 2 Mar. 2015.
Maris, Pavlos G. "The New Architecture For Hedge Fund Regulation: An Assessment Of The
Recent US And EU Initiatives." Law & Financial Markets Review 6.3 (2012): 208-217.
Academic Search Premier. Web. 2 Mar. 2015.

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Morley, John. "The Separation Of Funds And Managers: A Theory Of Investment Fund Structure
And Regulation." Yale Law Journal 123.5 (2014): 1228-1287. Academic Search Premier.
Web. 2 Mar. 2015.
Schwartz, Robert F., and Etay Katz. "US Hedge Fund Oversight In The Aftermath Of Madoff:
Finding The Right Balance." Law & Financial Markets Review 3.2 (2009): 139-144.
Academic Search Premier. Web. 18 Mar. 2015.
Semmler, Willi, and Raphaele Chappe. "Ponzi Finance And The Hedge Fund Industry."
Advances In Complex Systems 15.(2012): -1. Academic Search Premier. Web. 2 Mar.
2015.
Stulz, Ren M. "Hedge Funds: Past, Present, And Future." Journal Of Economic Perspectives
21.2 (2007): 175-194. Business Source Premier. Web. 18 Mar. 2015.
Summers, Nick. "Whats Ahead For Hedge Funds?." Bloomberg Businessweek 4410 (2015): 3738. Business Source Premier. Web. 18 Mar. 2015.