March, 2008

Hedging One's Bets - Increasing Access to Hedge Funds

Key materials
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The term “hedge fund” refers to a diverse class of private investment pools. These pools actively trade securities and are not subject to the full range of disclosure obligations and limitations on investment activities that federal securities law imposes on other types of investments. Hedge funds have rapidly grown in number and size in recent years to become major players in the financial markets, managing nearly $2.5 trillion globally. In the United States, unlike in several other advanced economies such as Ireland and Hong Kong, the law requires individuals to be wealthy (e.g., earning $200,000 in income if single) to be qualified to invest in hedge funds. Although this regulation is intended to protect investors, limiting hedge funds only to the wealthy prevents financially sophisticated yet non-wealthy investors from using the funds to minimize losses to their investment portfolios.