- Anne Jansen, Donald Mathieson, Barry Eichengreen, Laura Kodres, Bankim Chadha, and Sunil Sharma
- Published Date:
- May 1998
© 1998 International Monetary Fund
Cover design, charts, and composition:
Theodore F. Peters, Jr., Victor Barcelona, and IMF Graphics Section
Hedge funds and financial market dynamics/by a staff team led by Barry Eichengreen and Donald Mathieson with Bankim Chadha … [et al.]. — Washington DC : International Monetary Fund, 1998
p. cm. — (Occasional paper ; ISSN 0251–6365 ; 166)
Includes bibliographical references.
1. Hedge funds. 2. Hedge funds — Asia. I. Eichengreen, Barry J. II. Mathieson, Donald J. III. Chadha, Bankim. IV. International Monetary Fund. V. Occasional paper (International Monetary Fund) ; no. 166. HG4530.H33 1998
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Barry Eichengreen and Donald Mathieson
Barry Eichengreen and Donald Mathieson
Bankim Chadha and Anne Jansen
The following symbols have been used throughout this paper:
… to indicate that data are not available;
— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
– between years or months (e.g., 1994–95 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 1994/95) to indicate a crop or fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.
This occasional paper comprises a set of studies focusing on the role of hedge funds in financial market dynamics, with particular but by no means exclusive attention to the foreign exchange market. While the project was undertaken at the request of IMF management in the wake of the 1997 turbulence in Asian currency markets, its remit is broader: it considers not just “macro” hedge funds that take positions in currency markets on the basis of their assessment of current and prospective macro-economic and financial fundamentals, but the entire constellation of hedge funds, including global funds and emerging market funds and also sector funds, merger-arbitrage funds, market-neutral funds, and funds of funds. It seeks to place the hedge fund industry in context by analyzing the relationships of hedge funds to their institutional-investor counterparties and competitors. While much of the focus is necessarily on the role of hedge funds in the recent Asian currency and financial crisis, the paper considers also the role of other international investors in 1997 and in previous episodes of financial market turbulence.
In addition to the authors listed here, the paper benefited from the contributions of Subir Lall and Michael Spencer. Helpful comments were provided by Stanley Fischer, Michael Mussa, and other members of IMF management and staff. The authors are also grateful for conversations with hedge fund managers and other practioners in New York and London (to which Mr. Eichengreen led a mission in late October 1997) and Kuala Lumpur, Hong Kong Special Administrative Region (SAR), and Singapore (to which Mr. Chadha led a mission in early November 1997). Valuable input was provided by staff members of the Securities and Exchange Commission (United States), the Commodity Futures Trading Commission (United States), the Bank of England, the Financial Services Authority (United Kingdom), and the European Commission. Esha Ray of the External Relations Department edited the paper and coordinated production. Last but not least, the authors would like to thank Rosalind Oliver for her exceptionally able secretarial assistance.
The views expressed here are those of the authors and do not necessarily reflect the opinions of other members of IMF staff or its Executive Directors.