Research Handbooks in Financial Law series
Edited by Phoebus Athanassiou
Andrea Hankova and François-Serge Lhabitant* 46 INTRODUCTION Due to their strong appetite for eclectic asset classes and strategies, hedge funds have played an important role in the expansion of capital markets and economic growth worldwide. They have stimulated corporate activism, facilitated the restructuring of failed companies, financed the development of emerging sectors, improved market efficiency by acting as liquidity providers in a variety of situations and, in some cases, successfully designed trading strategies to profit from turmoil and volatility. However, hedge funds have also been the target of political blame, particularly in Continental Europe. Several European governments have expressed their displeasure over the increasing role played by hedge funds in financial markets and called for additional controls and regulation, at best, and shutting them down, at worst. Surprisingly, relatively little seems to be known of the European hedge fund industry. The focus of most of the research efforts so far has been on the United States (US) where more data and information are available. The purpose of this chapter is to fill this gap by providing a comprehensive review of the European hedge fund industry, its structure, players, and major strategies, as well as its historical performance. 1. KEY INDUSTRY STATISTICS Hedge fund statistics should always be considered with caution due to the absence of a central, authoritative source combined with the severe restrictions imposed on advertising and reporting of hedge fund performance. In this chapter, we therefore use commercial databases and index providers, which themselves rely on information...
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