Hostname: page-component-8448b6f56d-sxzjt Total loading time: 0 Render date: 2024-04-23T20:14:34.662Z Has data issue: false hasContentIssue false
  • English
  • Français

Hedge Fund Ethics

Published online by Cambridge University Press:  23 January 2015

Thomas Donaldson
Get access Rights & Permissions [Opens in a new window]

Abstract

Hedge funds are targets of mounting ethical criticism. The most salient focuses on their opacity. Hedge funds are structured to block transparency for strategic reasons: that is, they systematically deny information to their own investors and to governments in order to protect their competitive advantage, even though the information they hide holds tremendous significance for the interests of both groups. In this article I will detail the ethical allegations made against hedge funds, showing why their opacity creates intractable conflicts that cannot be resolved through government regulation. Sometimes opacity be regulated away; but with hedge funds I show why it cannot because of “regulatory recalcitrance.” In the end a form of voluntary moral coordination, a form of “microsocial contract” instituted as an industry standard, is required relief. In a word, the solution to hedge fund opacity is ethical.

Type
Society for Business Ethics Conference Dialogue: Hedge Funds and Private Equity
Information
Business Ethics Quarterly , Volume 18 , Issue 3 , July 2008 , pp. 405 - 416
Copyright
Copyright © Society for Business Ethics 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Anderson, Jenny, and Sorkin, Andrew Ross. 2007. “Congress Weighs End to Hedge Fund Tax,” New York Times (June 21).Google Scholar
Bernanke Ben, S. 2006. “Hedge Funds and Systemic Risk,” Federal Reserve Bank of Atlanta’s 2006 Financial Markets Conference. Sea Island, Georgia: Federal Reserve Board.Google Scholar
Cassidy, John. 2007. “Hedge Clipping: Is There a Way to Get Above-Market Returns on the Cheap?” The New Yorker (July 2): 1–6.Google Scholar
Donaldson, Thomas, and Thomas, Dunfee. 1999. Ties That Bind: A Social Contracts Approach to Business Ethics. Boston: Harvard Business School Press.Google Scholar
Foster, P. Dean, and Young, H. Peyton. 2008. “Hedge Fund Wizards,” The Economists’ Voice 5(2).Google Scholar
Gauthier, P. David 1986. Morals by Agreement. Oxford: Clarendon Press.Google Scholar
Grant, Jeremy. 2007. “Unease on Hedge Funds Mars Hearing,” Financial Times (July 11).Google Scholar
Leonhardt, David. 2007. “Worth a Lot, but Are Hedge Funds Worth It?” New York Times (May 23).Google Scholar
Kat, M. Harry 2003. “10 Things Investors Should Know About Hedge Funds,” Alternative Investment Research Centre Working Paper Series. London: Cass Business School, City University, 25.Google Scholar
Kay, John. 2008. “Just Think, the Fees You Could Charge Buffett,” Financial Times (March 11).Google Scholar
Kelly, Robert. 2007. “Hedge Fund Asset Pricing Is a Crucial Issue,” Financial Times (May 28).Google Scholar
Krugman, Paul. 2007. “Gone Baby Gone,” New York Times (October 22).Google Scholar
Nelson, Julianne. 1994. “Business Ethics in a Competitive Market,” Journal of Business Ethics 13(9): 663–67.CrossRefGoogle Scholar
New York Times. 2007. “G8 Summit to Call For Hedge Fund Vigilance” (June 4).Google Scholar
Scholtes, Saskia. 2007. “Funds Attack Banks’ Aid for Subprime Borrowers,” Financial Times (May 31).Google Scholar
Schuman, Joseph. 2007. “Blackstone Agonistes: Ipo May Amplify Taxes,” Wall Street Journal Online.Google Scholar
Sen, Amartya Kumar. 1992. Inequality Reexamined. Cambridge, Mass.: Harvard University Press.Google Scholar
Wolf, Martin. 2008. “Why Today’s Hedge Fund Industry May Not Survive,” Financial Times (March 18).Google Scholar