Conclusion and Outlook

Abstract

The total amount of capital managed by hedge funds has grown significantly over the last decade. Therefore, understanding hedge funds is important for investors, regulators and politicians because they differ in many important aspects from conventional mutual funds and pension funds. In particular, they are not subject to regulatory restrictions on their investment strategies and can therefore implement sophisticated dynamic trading strategies using leverage and derivative instruments. Moreover, their managers face high-powered incentives to generate returns which also might have substantial implications on their trading behavior. Due to these special characteristics, the growth of hedge funds has important implications for nearly all dimensions of financial intermediation. This dissertation focuses on two of these aspects, including the implications of hedge funds for asset management and for corporate governance.