Super Hedge Fund
33 Pages Posted: 23 Aug 2014
Date Written: August 22, 2014
Activist hedge funds revolutionized corporate America, but generated both excitement and criticism alike. This paper suggests a novel market mechanism, a "super hedge fund," that would maintain the benefits of hedge fund activism while curbing its downsides. The super hedge fund would not really be a fund but, rather, a contractual arrangement among a broad group of institutional investors and a task force of financial experts. The task force would pool together the potency of the institutional shareholders in a sophisticated manner and then unleash it on target corporations. Unlike current hedge fund activism, the super hedge fund would not necessitate substantial financing or market transactions and, therefore, would be extremely efficient and very accessible. Importantly, the mechanisms of the super hedge fund would operate so as to ensure that the fund's incentives are closely aligned with the interest of the long-term shareholders of the targeted corporations. Hence, the new mechanism should respond to the claims of short-terminism lodged at current hedge fund activism.
Keywords: Hedge Funds, Shareholders Activism, Institutional Investors, Corporate Governance
JEL Classification: K22, G34
Suggested Citation: Suggested Citation