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Hedge Fund Ethics

Published online by Cambridge University Press:  23 January 2015

Thomas Donaldson
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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

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