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The purpose of this paper is events and analysis of present a hedge fund collapse, offer lessons to investors and hedge fund industry stakeholders and propose a possible remedy for mitigating operational risks and associated potential losses.

This study focused on one hedge fund case study and conducted a thorough investigation of the events that led to the collapse and eventual filing of the Securities and Exchange Commission (SEC) complaint. All articles and publications used for this research are available in the public domain and accessible.

Wood River Capital Management had concentrated the portfolios of its two hedge funds into one stock, EndWave Corp. Fund Manager violated terms of offering memorandum. Investors were not made aware of and did not discover the operational risks. Stock price of EndWave plummeted. There was no independent oversight over the funds. The values of the two funds dropped significantly. Investors attempted to redeem but the funds were not liquid. The SEC filed a complaint. Mr Whittier was sentenced for three years in jail.

It is an analysis of US-based hedge fund, not an empirical paper. The article presents critical analysis and offers many valuable lessons to hedge fund industry stakeholders.

This paper helps investors in terms of identifying a hedge fund’s operational risks and conducting more effective due diligence while vetting a hedge fund. This could potentially save investors and constituents billions of dollars, by avoiding potential hedge fund collapses. This paper suggests that the scope of fiduciary duty be expanded to cover hedge fund industry vendors.

Thorough research of a hedge fund that collapsed because of poor investment decisions, not self-enrichment at expense of fund investors. This paper provides lessons to investors in terms of identifying a hedge fund’s critical operational risks and conducting value preserving due diligence. This could potentially save hedge funds investors billions of dollars, by avoiding potential hedge fund collapses. This paper recommends that the scope of fiduciary duty be expanded to cover hedge fund industry vendors.

This paper aims to help explain the rapid growth in aggregate hedge fund assets under management until June 2008 followed by their subsequent dramatic collapse in terms of the conflicting emotions such investment vehicles evoke, and, from this, to consider the implications of the excitement‐generating potential underlying all financial innovations.

Within the framework of critical discourse analysis, this paper explores how hedge funds were represented in the financial press, manager interviews, investor comments, and Congress hearings, before and after the burst of the hedge fund “bubble”. The authors then draw on the psychodynamic literature, and frame the human unconscious need for excitement in this discourse.

The paper finds evidence demonstrating how hedge funds were transformed in the minds of investors into objects of fascination and desire with their unconscious representation dominating their original investment purpose. Based on a psychoanalytic interpretation of financial markets, and dot.com mania in particular, the authors show how hedge fund investors' search for “phantastic objects” and the associated excitement of being invested in them can become dominant, resulting in risk being ignored.

The authors take an interdisciplinary perspective drawing on the insights of the psychoanalytic understanding of unconscious fantasies, needs and drives as these relate to investment activity.

Public policy implications are that stricter ethical guidelines for the hedge fund industry need to be introduced, and suitability regulations that go beyond mandatory transparent disclosure of investment risks are required.

The paper is one of very few studies concerning investors' emotional attachment to financial innovations, and builds on the emerging field of emotional finance. The conclusions and implications discussed in the paper go beyond any single financial market or product.

The purpose of this paper is two fold: educate investors about hedge fund managers' activities prior to the fraud recognition by the authorities and to help investors and other stakeholders in the hedge fund industry identify red flags before fraud is actually committed.

The paper investigates fraud committed by the Bayou Funds, Beacon Hill Asset Management, Lancer Management Group (LMG), Lipper & Company and Maricopa investment fund. The fraud activities took place during 2000 and 2005.

The five cases alone cost the hedge fund investors more than $1.5 billion. Investors may have had a good opportunity for avoiding the irrecoverable costs of the fraud had they carefully vetted the backgrounds of the hedge fund managers and/or continuously monitored the funds activities, especially during turbulent market environments.

This is the first research paper to identify and extensively investigate fraud committed by hedge funds. In spite of the size of the hedge fund industry and relatively substantial level and inevitably recurring fraud, academic journals are to yet address this issue. The paper is of great value to hedge funds and their individual and institutional investors, asset managers, financial advisers and regulators.

The purpose of this paper is to examine in which ways hedge funds contribute to financialization.

Two already identified conduits through which financialization operates are applied to hedge funds.

The paper finds that hedge funds drive the phenomenon of financialization in two major ways, i.e. the financialization of corporations, and the financialization of markets. Hence, hedge funds can be conceived as agents of change for financialization.

There are indications that hedge funds possess disciplinary power. Future research should address this pivotal point, even though such power will be difficult to prove empirically.

Hedge funds have been found to potentially increase market volatility. In times of crisis, stricter regulation of these investors that take excessive risks seems prudent.

Through linking “hedge funds” with “financialization” this paper closes a research gap. In addition, the so far rather structural debate about financialization benefits from the actor-centered approach of this paper.

This paper aims to provide an analysis and report on the current regulatory environment for US hedge funds and explore the latest actions from governmental groups and the private sector.

A compilation of the most recent government communications, legislative proposals, industry newsletters and seminars, and other related sources.

US regulation surrounding hedge funds is in a state of flux. Substantially more pension money being invested in hedge funds has become a very important factor in the discussions. Hedge funds that are already registered are staying so in the vast majority of cases. The consensus is that more regulation is likely; however, what form that regulation will take is still unsettled at this point.

Based on first‐hand experience working with hedge funds, the authors have endeavored to present and outline the most up‐to‐date information on this hot‐button issue.

The objective of this research is to educate investors and hedge fund industry stakeholders about a hedge fund manager's alarming activities prior to recognition of the fraud by the authorities. The lessons serve as red flags to stakeholders in the hedge fund industry such as prime brokers, auditors, administrators, accountants, custodians and government regulators, and especially investors conducting due diligence on hedge funds. A far‐reaching proposal is for the industry to found a hedge fund information depository (HFID) where participants/stakeholders provide information on any hedge fund on a regular basis. Such an information clearing‐house would facilitate a long overdue timely communication among hedge fund industry constituents. The services would be available for a fee. This service elevates transparency in the hedge fund community to an unprecedented level and could ultimately mitigate a manager's fraud.

A major hedge fund fraud case, Lancer Management Group, is used an example and application of HFID.

Investors in the Lancer funds lost more than $500 million. In the case of Lancer, there were several “alerts” or “triggers” many months before the actual filing of the SEC complaint against the fund. Hedge fund manager fraud could be mitigated through the establishment of the information depository. Had the depository been in place, some Lancer funds stakeholders could have made different decisions.

Some hedge fund industry stakeholders may reluctantly join HFID. Researching the willingness of hedge fund industry stakeholders to join HFID would be a good extension of the current research.

Had a third party become aware of the alerts, this third party could have made a different investment decision. Most importantly, this depository would allow all the hedge fund industry stakeholders (accountants, administrators, auditors, marketers, prime brokers, custodians) to contemporaneously communicate with one another.

The approach and the solution are both unique. In addition, the topic is very controversial and timely, yet few business professionals explore research projects on fund manger fraud. HFID would be of great value to hedge fund industry stakeholders, especially investors.

Previous studies have established that the failure of the hedge fund, long‐term capital management (LTCM), was associated with significant negative abnormal returns for many US banks, especially around September 2, 1998, when LTCM announced its failure. This study attempts to examine whether bank value‐at‐risk (VaR) disclosures were used by investors to assess the potential trading loss that a bank could suffer at that time.

This study examines whether there was any association between disclosed VaR and the magnitude of abnormal returns and trading volume surrounding the announcement date.

The results indicate that there was no such association which suggests that investors did not use the VaR information to assess the potential trading losses of exposed banks. Banks that formed part of the LTCM bailout consortium and those with larger amounts of notional derivatives faced the largest negative reaction at the time of the failure announcement.

VaR disclosures are costly to prepare and complex to interpret. The study finds no benefits of VaR disclosures to bank investors.

In August 2007 the Mainsail II SIV-Lite was frozen by its trustee as a result of the ongoing credit crisis. The state of Maine held $20 million of Mainsail commercial paper in its Cash Pool portfolio, a short-term portfolio that puts temporary, excess state revenues to work. When word of the potential loss became public, the Treasurer came under attack. The case introduces the functions of a state Treasury department, with particular emphasis on the investment objectives and guidelines for the cash pool as well as its composition. The case reviews the events leading up to and including August 2007, the month when the credit markets first began to seize and when the financial crisis effectively began. It examines securitization, structured finance, and the Mainsail SIV-Lite structure in some detail.

The purpose of this paper is to stimulate debates about contemporary auditing practices.

The paper builds a generalised theory of auditing to pose some questions about the basic auditing model, notions of audit quality and the possibility that some transactions cannot be audited in the traditional way.

It is argued that the basic auditing model is flawed since it makes auditors financially dependent on companies. The conventional approach to “audit quality” is also incomplete as it pays little attention to the organisational and social context of auditing. It also argues that as companies have diversified into new forms of investment and complex financial instruments, some transactions may be not be capable of being audited in the traditional way.

The paper does not offer a comprehensive critique of contemporary auditing issues. Rather it is a focus on some selected issues.

The paper encourages reflections on contemporary practices and offers some suggestions for reforms.

The paper is a combination of theory, evidence and speculation on contemporary issues.