Abstract
This article demonstrates the profound and lasting impact of hedge funds on mainstream investing by identifying and analyzing numerous activities typically associated with hedge funds that have become an integral part of mainstream investing and financing activities. Examples include the growth of exchange-traded funds and mutual funds that follow hedge fund strategies. A number of mutual funds use leverage and sell short, hedge funds provide liquidity in the stock and Treasury bond markets, and banks follow on the footsteps of hedge funds by owning some of the mortgages they originate. Also, hedge funds make commercial loans, modify residential mortgages, and underwrite reinsurance. Hedge funds significantly influence corporate governance by playing key roles in mega acquisitions. NASDAQ OMX offers the alpha index options designed to allow investors to trade options on the relative performance of a stock or exchange-traded fund versus that of SPY.
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