The Volcker Rule cuts banks off from direct hedge fund investment and thereby pushes them toward accessing hedge fund strategies through retail alternative funds, a shift that could be substantial given banks' prior role as major hedge fund investors.
Source quote, verbatim
By limiting banks' investments in derivatives and the hedge funds they sponsor,57 the Dodd-Frank Act limits access to hedge fund investments but incentivizes banks to access hedge fund strategies using a retail alternative fund.
Kaal, Confluence of Mutual and Private Funds (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2715083
Holds when
bank holding companies after July 21, 2015
Dodd-Frank section 619 and related derivatives limits
Classification
mechanismsupport: arguedsystemic-risk
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