Should hedge funds be regulated?

Abstract

The rapid growth of the hedge fund industry has attracted increasing attention from government regulators. In the United States, for example, the Securities and Exchange Commission(SEC) voted in October 2004 to require many hedge funds to officially register with the Commission beginning in 2006. Actions such as this have led to a widening debate over whether(or to what extent) government should play a role in the development of the hedge fund industry. To address this issue, The Program on Alternative Investments at Columbia Business School's Center on Japanese Economy and Business sponsored a symposium entitled "Should Hedge Funds Be Regulated?" which was held at New York's University Club in November 2004. U.S. SEC Commissioner Harvey Goldschmid, currently on leave from Columbia Law School, delivered the keynote speech, arguing in favor of the Commission's October decision. Following Commissioner Goldschmid's address, Program Director Mark Mason moderated a panel of leading experts from the business, government, and academic communities who debated the pros and cons of government involvement in the industry. These panelists included Franklin Edwards, Arthur F. Burns Professor of Free and Competitive Enterprise at Columbia Business School; John Gaine, President of the Managed Funds Association, a leading hedge fund industry group; Sudhir Krishnamurthi, Managing Director of Rock Creek Capital, a Washington, D.C.-based fund of hedge funds; and Nobuyuki Kinoshita, Director at the Financial Services Agency of Japan.This report covers the keynote address by Commissioner Goldschmid, together with the remarks of the expert panelists and selected exchanges with the audience. Columbia Business School Dean Glenn Hubbard and Center on Japanese Economy and Business Director Hugh Patrick delivered opening remarks, which are also reproduced in this report