Hedge Fund Regulations Unlike mutual funds, hedge funds are not highly regulated, thus making them unrestricted and highly unpredictable. Regulations serve as the handcuffs on funds in order to make it less likely that they outperform the market. Yet, although the market might seem to be depreciating, hedge funds are allowed to short sell, using different methods and strategies to speed up performance and decrease market volatility. This concept makes hedge funds less likely to be affected by market trends. The Need to Regulate Hedge Funds Due to the popularity of the hedge fund industry, there is a greater need to regulate the hedge fund market. Hedge funds are similar to mutual funds in many ways except for regulation. Since these funds are usually unregulated, except for instances where the managers themselves create the regulations, hedge funds require larger amounts of investment. The investor’s identity is protected because these funds are private. Government entities and other companies may not have information on hedge funds. Because of the nature of these funds, companies can transfer huge amounts of funding and gain substantial profits without anyone having followed the transaction. This creates suspicion in the minds of investors who do not have an idea where their money is put into. Such instances require better regulations that make the funds more transparent. Since transparency gives investors more security, it establishes a better relationship between the hedge fund industry and the investors. When hedge fund regulations come into effect, they create more accountable managers. They allow investors to examine the credibility of hedge fund managers prior to entrusting cash in the hands of hedge fund companies. Absence of Hedge Fund Statistics There are no official statistics that can help investors conduct their research. Since hedge funds are handled in private, no reliable statistics can be compiled. Because of this issue, investors are exposed to high risk of losing money, compared to gaining profits. The problem is that no solid base is available on which to choose how to invest one’s cash. Hedge Fund Regulations in Canada, US and UK In the United States and United Kingdom, the financial authorities are making moves toward better regulation of hedge funds. In this way, they will be able to control the financial activities of hedge fund companies better. However in the US, none of the proposed bills for regulations has received much consideration at present. In Canada, the authorities express satisfaction with the current rules and regulations on investment vehicles. Hence, no changes to the rules and regulations will be implemented in the foreseeable future. Regulations ensure an overall control over the hedge fund market. Proper hedge fund guidelines can accomplish two tasks: they can reduce the suspicion of investors and attract more people to investing in the hedge fund market. Regulations will establish a safer investment environment. The use of abusive tax shelters and offshore tax havens will be banned. Last but not least, authorities will be capable of detecting, preventing, and punishing excessive manipulation and price speculation.