Hedge Fund Forum Shopping

Abstract

Hedge funds have been the subject of media attention in the United States (“U.S.”) and around the world given the pronounced growth of the hedge fund sector in recent years and the comparative dearth of regulations faced by hedge fund managers. The first part of this paper provides an overview of the potential agency problems associated with managing a hedge fund and the associated rationales for hedge fund regulation. While hedge funds are hardly regulated in the U.S., there are nevertheless jurisdictions outside the U.S. with different and sometimes more onerous sets of regulatory requirements. Examples of international differences in hedge fund regulation include minimum capitalization requirements, restrictions on the location of key service providers and different permissible distribution channels via private placements, banks, other regulated or non-regulated financial intermediaries, wrappers, investment managers and fund distribution companies. The second part of this paper provides an analysis of hedge fund strategies in the context of international differences in hedge fund regulation. Certain fund strategies have been characterized in the law and finance literature, as well as in popular media and public policy debates, as being inherently more risky and associated with more pronounced agency problems. For instance, managed futures, long/short and event driven strategies might be associated with greater risk and agency problems than