Risk, Regulation, and Organizational Structure

The material in this chapter should be cross-referenced with the following case: A Tale of Two Hedge Funds: Magnetar and Peloton.

Investor Risks

Hedge fund investors are exposed to portfolio-level risks at each hedge fund they invest in, as summarized in Figure 14.1. In addition, they are exposed to hedge fund investment–level risks, which include business risks, people risks, investment strategy risks, and systemic risks.


Figure 14.1 Risks in hedge fund investing. UBTI, Unrelated Business Taxable Income, is income regularly generated by tax-exempt entities by means of taxable activities. In the ...

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