kaal:claim:2748096-006

Because hedge fund losses are absorbed directly by a large and dispersed body of investors and their equity capital, private fund advisers are unlikely to trigger a systemic event, and their activity may even reduce market volatility.

But some research suggests that private fund advisers are unlikely to trigger a systemic event because losses in hedge funds are directly absorbed by the multitude of investors and their equity capital and may actually reduce market volatility

Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016), THE DEBATE ON HEDGE FUNDS' SYSTEMIC RISK, p. 3
https://ssrn.com/abstract=2748096 · source PDF

Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096

• applies to funds financed by investor equity rather than short term debt

mechanismsupport: evidencedprivate-fundssystemic-riskrisk-and-incentiveseconomics

• contests kaal:claim:2470008-006 Hedge funds threaten the financial system through two distinct channels: directly, by damaging systemically im...

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