Hedge Fund Regulation: The President's Working Group Committees' Best Practices Reports: Raising the Bar But Missing Risks

Abstract

Two private-sector committees empaneled by the President's Working Group on Financial Markets have released their reports on in hedge fund regulation. The more notable of the two is the Asset Managers Committee report, which reflects the views of hedge-fund managers themselves. The report does go beyond previous compilations of best practices in some ways, such as by recommending enhanced disclosures of the types of assets that funds hold. But its discussion of counterparty risk management - the key to controlling any systemic risk that hedge funds may pose - is cursory and inadequate. A more detailed discussion of this issue seems important to any serious attempt to address the systemic risks posed by hedge funds.