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Corporate Governance

: The Harvard Law School Corporate Governance Blog

The Convergence of Traditional and Alternative Investment Products

By Harvard Law School Program on Corporate Governance

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Editor?s Note: The following post comes to us from Citi Fund Services, Inc., and is a summary of an article that first appeared in the Investment Lawyer, which is available here.

For more than half a century, traditional investment funds (mutual funds) and alternative investment funds (hedge funds) occupied separate and distinct segments of the investment market. They employed different investment strategies, were subject to different regulatory standards, and mostly catered to different classes of investors. Increasingly, however, these two types of funds have found themselves converging toward common investing ground.

Recent changes to the capital markets, to investor preferences, and to industry regulations have caused investors to seek out investment products that contain the characteristics of both mutual funds and hedge funds. Investment managers have responded by introducing a new breed of hybrid funds that combine the exotic strategies of hedge funds with the transparency and relative stability of mutual funds. Because mutual funds and hedge funds operate within different logistical and regulatory frameworks, investment managers desiring to operate in this new hybrid space must familiarize themselves with the elements of each.

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Full post as published by The Harvard Law School Corporate Governance Blog on February 19, 2011 (boomark / email).