Politics beyond Borders: Regulating Hedge Funds

Cornelia Woll

Hedge fund activities have been under close scrutiny since the 1990s. Despite their relatively marginal role in precipitating the financial crisis in 2008, these sophisticated investment tools have now become the target of regulation attempts. This project compares the proposed US legislation aimed at requiring the registration of hedge funds with the disputed EU Alternative Investment Fund Managers Directive. It investigates how different investment markets structure the operations of hedge funds and the way different kinds of business-government relationships affect the evolution of regulation. Seeking to demonstrate how regulation travels from national settings to international forums and back, the study shows that the interconnection of markets lets governments impose regulatory changes in neighboring countries even when those neighbors have substantial market power and political autonomy. Project duration: January 2010 to September 2011.

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