Understanding Investment Funds

1. Introduction

Investment funds are managed by investment companies that are considered to be financial intermediaries; these intermediaries are entrusted with the savings of individuals and convert these savings into capital through investment in corporate equity or even debt. The term ‘investment company’ was defined in an American case as “a shell, a pool of assets consisting of securities, belonging to the shareholders of the fund.” Similarly, in the United Kingdom (UK), investment institution is defined as a “class of financial intermediary which enable small investors to participate in collective investment funds.” Thus, an investment fund is essentially a corporate entity formed by the pool of assets of the investors. Investors have chosen to entrust their savings with such investment funds for decades because of several advantages offered them through these investments including access to expert management and diversification. Individual investors may not have the expertise, or the confidence to directly invest in securities. They may also not have the capital to diversify their investments. Investment funds offer opportunities to both large and small investors to use their savings to make more capital by employing the expertise and management skills of the investment fund manager. In the UK, the principal investment institutions are pension funds, investment trusts, life assurance companies, open-ended investment companies, and unit trust. The last named is called mutual fund in the United States. These kinds of funds are available in the UK since 1997.

1. Roberta S Karmel, ‘Mutual Funds, Pension Funds, Hedge Funds and Stock Market Volatility - What Regulation by the Securities and Exchange Commission Is Appropriate’ (2005) 80 Notre Dame Law Review 909, 914; Mike Buckle and John Thompson, The UK financial system: Theory and Practice (Manchester University Press 2020) 123.
2. Zell v. Intercapital Income Sec., Inc., 675 F.2d 1041 (9th Cir. 1982), [1046].
3. Buckle and Thompson, The UK financial system: Theory and Practice (n) 123.
4. John Morley, ‘The separation of funds and managers: a theory of investment fund structure and regulation’ (2013) 123 Yale Law Journal 1228.
5. Tamar Frankel and Clifford E Kirsch, Investment Management Regulation (Anchorage 1998); Sungjoung Kwon, Michelle Lowry and Yiming Qian, ‘Mutual fund investments in private firms’ (2020) 136(2) Journal of Financial Economics 407.
6. For a discussion on individual behaviour to investments see, Brad M Barber and Terrance Odean, ‘The behavior of individual investors’ in Handbook of the Economics of Finance, Vol. 2 (Elsevier 2013).
7. Herbert B Mayo, Investments: an introduction (Cengage Learning 2020).
8. Frankel and Kirsch, Investment Management Regulation (n).
9. Ibid.

Mutual funds were first introduced in the Netherlands in the 18th century at a time when the Dutch economy was in a recession; the purpose of the fund was to allow investors to mutually benefit by pooling their savings into one fund which could then diversify their investments. Since that time, collective investment schemes managed by professional fund houses or institutional investors have become very popular investment vehicles in many countries of the world. In the capitalist countries like the UK and the United States (US), there has been exponential growth of investment funds. At the same time, research on investment funds indicates at a number of regulatory challenges associated with investment funds, which are discussed in this dissertation. The scope of this research is limited to capitalist economies like the UK and the US and the regulatory challenges facing investment funds in these economies. This dissertation takes a critical approach to understanding the responses that have been made to address the regulatory challenges posed by investment funds.

The nature of how individuals invests their savings in the public securities market has changed over time. Earlier, individuals invested directly in the market; however, in the contemporary period, institutions are the primary source through which such investments are made. Thus, private investments have become more reliant on how institutions manage the private savings of the individuals. This has led to an increased need for regulation of how such institutions manage investments. In a capitalist economy like the UK or the US, investment funds are regulated under a number of laws and regulatory measures. One of the key objectives of regulation of such schemes is to ensure transparency through full disclosure to the public about the terms of the schemes and the risks involved. A number of financial events related to investment funds have led to the concerns that there is a need to regulate the investment funds so as to provide measures that address the risks associated with such investments. Key areas of concern in the recent time have involved the role played by these institutions in management of the private savings as the behaviour of some of the institutions led to the serious losses of retirement savings.

Regulatory responses to the challenges and risks associated with investment funds in general have been crafted to provide more protection to the private investors who are the beneficiaries of these institutions. For instance, in the United States, the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act) was enacted to impose new regulatory responsibilities on public companies. However, it is argued that the introduction of the legislation has not resolved the problem of improving the responsibility of institutional investors to their beneficiaries. In other words, the accountability and responsibility of the institutional investors has been argued to not have been effectively addressed by the Sarbanes-Oxley Act. In the UK, the Financial Services and Markets Act 2000, Part XVII relates to collective investment schemes, with sections 235 to 284 responding to these issues. Section 235 defines “collective investment scheme” as " arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income". In the EU, collective investment schemes are regulated by the Undertakings for Collective Investment in Transferable Securities Directives 85/611/EEC; this directive was amended by 2001/107/EC and 2001/108/EC. These are some of the examples of regulatory measures that are discussed in more detail in this dissertation.

1. William N Goetzmann and Geert Rouwenhorst, The Origins of Value: The Financial Innovations that Created Modern Capital Markets (Oxford University Press 2005).
2. For discussion on growth of investment funds in different countries see, Howard Gospel, Andrew Pendleton and Sigurt Vitols (eds.), Financialization, new investment funds, and labour: an international comparison (Oxford University Press 2014).
3. David S Kidwell, David W Blackwell, Richard W Sias and David A Whidbee, Financial institutions, markets, and money (John Wiley & Sons 2016); Wolfgang Bessler and Heinz J Hockmann, ‘The Growth and Changing Role of Passive Investments: A Critical Perspective on Index Mutual Funds and Exchange Traded Funds’ (2016) 28(6) Zeitschrift für Bankrecht und Bankwirtschaft 406.
4. Donald C Langevoort, ‘Global Securities Regulation after the Financial Crisis’ (2010) 13(1) Journal of International Economic Law 799.
5. Ibid
6. Ibid
7. Karmel, ‘Mutual Funds, Pension Funds, Hedge Funds and Stock Market Volatility - What Regulation by the Securities and Exchange Commission Is Appropriate’ (n).

Providing for regulatory mechanisms for institutional investors who manage investment funds is important not just for the protection of the individual investors, but also for the national economy. The impacts of loss of household savings through failed investments have been experienced in capitalist economies in different events over many decades; in the US, the Great Depression in the 1920s and the more recent financial crisis in 2007-2008 have led to serious impacts on the national economies as well. Indeed, the 2007-08 sub-prime crisis exposed failures of major banks and investment funds to maintain business ethics, with important names like the Lehman Brothers also being involved in activities that were not conducive to protection of investors’ savings; this brought more focus on how activities of financial business enterprises can have wide social and economic implications. There is therefore a crucial link between the actions of the institutional investors in managing the investments of their beneficiaries and the national economy.

There are two reasons for regulatory framework to respond to the regulatory challenges posed by investment funds: first, a firm that seeks funds for investments from the members of the general public can be treated as a public body, attracting for this reason the need for such public body to fully disclose its financial affairs; and second, ensuring of national welfare because the institutional investors are involved in the process of allocation of capital in the national economy. Regulation is also important because the behaviour of the institutional investors is related to the stock market behaviour, and the latter behaviour is not necessarily guided by rational and information-based decision making by the investors as has been noted in a number of scholarly works on behaviourism in the stock markets.

1. Jeff Madura, Financial markets & institutions (Cengage learning 2020) 241.
2. Karmel, ‘Mutual Funds, Pension Funds, Hedge Funds and Stock Market Volatility - What Regulation by the Securities and Exchange Commission Is Appropriate’ (n).
3. Financial Services and Markets Act 2000, Section 235.
4. K Anderberg and J Brescia, ‘UCITS IV: Reforms to the UCITS directive adopted by the European Parliament’ (2009) Euromoney’s International Investment and Securitisation Review 17; Nils S Tuchschmid and Erik Wallerstein, ‘UCITS: can they bring funds of hedge funds on-shore?’ (2013) 15(4) The Journal of Wealth Management 94.
5. Christoph Dörrenbächer and Mike Geppert, ‘Power and Politics in the Multinational Corporation: An Introduction’ in Christoph Dörrenbächer and Mike Geppert (eds), Politics and Power in the Multinational Corporation: The Role of Multinationals (Cambridge: Cambridge University Press 2011).
6. Ibid.
7. Ibid.

There are some differences between the US and the UK market of investment funds, which need to be clarified at the outset as these are the two jurisdictions that are largely covered in this dissertation. The key difference between the two jurisdictions is that they operate under different market structures. Trading in mutual funds in the US is fragmented, but in the UK there is one exchange for all trading. In the US, trading can be done on the Nasdaq, which is driven by order book or the New York Stock Exchange (NYSE), which has a hybrid system. In the UK, the single exchange for trading is the London Stock Exchange (LSE), which employs a mix of order book and a hybrid quote/order book system. These different market structures in the two countries lead to variations in characteristics of liquidity and measurement of liquidity risks in the two countries. Despite these differences however, it is appropriate to analyse how investment funds pose challenges to regulatory system and how the system responds to these challenges because both the US and the UK offer good examples of capitalist market structures which are the scope of this research.

2. Different legal structures of Investment Funds: Mutual funds, Hedge funds, and Pension funds

This chapter discusses the legal structures involved in pension funds, mutual funds, and hedge funds. The section discusses how these three types of funds work and what are the differences between them with a focus on the regulatory comparison between the funds.

In the UK, there are different kinds of investment funds that are available for the investors; these include pension funds, unit trusts, investment trusts, open-ended investment companies, to name a few. Hedge funds are relatively new kinds of investment funds in the UK, but they have emerged as an important investment vehicle for individual investors in the UK.

2.1 Mutual funds, Hedge funds, and Pension funds: Definition and nature of the funds

The term ‘Mutual Fund’ is used to describe “an investment company that invest the shareholders’ money in a diversified selection of securities (such as stocks, bonds, money market instruments and similar assets).” (Taken this from a book which quoted Black’s. Actual Black’s is available at https://www.worldcat.org/title/blacks-law-dictionary/oclc/420487111/viewport). Mutual fund is a fund of pooled investments from a number of investors and which is managed by professionals who invest the fund money in market securities. Mutual funds are often open-ended, although there are also closed ended mutual funds. In the UK, mutual funds usually go by the name ‘Open-ended Investment Company’, while mutual fund is the name used for open-ended professionally managed funds in the United States. The first use of mutual funds in global history is usually located back to the Netherlands (the Dutch Republic) in the 1772-73 crisis, which was discussed briefly in the introduction to this dissertation. In the US, mutual funds were first operated only in the late 19th century. Similarly, mutual funds were introduced in the UK in the late 19th century although it has one of the largest unit trusts industry in the world today. On the other hand, the US too has a significantly great mutual fund industry with the largest mutual fund manager (Vanguard) being valued at USD 4.7 trillion.

1. Donald C Langevoort, ‘Taming the Animal Spirits of the Stock Markets: A Behavioral Approach to Securities Regulation’ (2002) 97 Newark University Law Review 135; Robert Prentice, ‘Whither Securities Regulation? Some Behavioral Observations Regarding Proposals for Its Future’ (2002) 51 Duke Law Journal 1397; Lynn A Stout, ‘The Unimportance of Being Efficient: An Economic Analysis of Stock Market Pricing and Securities Regulation (1988) 87 Michigan Law Review 613.
2. J Foran and N O'Sullivan, ‘Liquidity risk and the performance of UK mutual funds’ (2014) 35 International Review of Financial Analysis 178.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
7. Buckle and Thompson, The UK financial system: Theory and Practice (n).
8. Ibid.

The growth of mutual fund industry is driven by a number of factors, predominantly the advantages offered by mutual fund investment. These advantages include ability of high levels of diversification as mutual fund managers can purchase a number of securities in the market with the pooled assets under their management. Mutual funds are also less risky than other investment because of the diversification of securities. Another advantage is that it is highly liquid; in most countries like the US, mutual funds can be redeemed within a week or lesser allowing the investor to have a low liquidity risk. Another advantage is that it is accessible to both large and small investors and for investors who are not confident to invest in the securities directly. Moreover, mutual funds are managed by professionals who supervise the funds and provide their expertise for identifying the securities and bonds that the fund will be investing in. Finally, due to higher regulation by the government, information regarding the mutual funds is made transparent and accessible to the investors through mandatory disclosure norms. This allows the investors to apply their independent judgment on whether they would want to invest in the fund or not. There are also risks associated with mutual funds as the revenue is linked to the market and the fund managers cannot guarantee a predictable and sustainable income.

1. B Garner (ed), Black’s Law Dictionary (Eagan, MN: West Publishing Company 2009) 237.
2. Buckle and Thompson, The UK financial system: Theory and Practice (n) 143.
3. Goetzmann and Rouwenhorst, The Origins of Value: The Financial Innovations that Created Modern Capital Markets (n).
4. Jan Jaap Hazenberg, ‘A New Framework for Analyzing Market Share Dynamics among Fund Families’ (2020) Financial Analysts Journal 1.
5. Ibid.
6. Robert Pozen and Theresa Hamacher, The Fund Industry: How Your Money is Managed (Hoboken, New Jersey: Wiley 2015) 8–14.
7. Ibid.
8. Ibid.
9. Ibid.
10. Ibid.
11. Ibid.

In the US, mutual funds have a structure of corporations or business trusts. Mutual funds are generally structured as open ended and closed ended funds, and unit investment trusts. Open ended funds are those that are required to redeem their shares or buy back from the investors at the value computed on a given day or within a specific period. The period allowed to the funds for effecting this buy back is different in the US and the UK. In the US, open ended funds are required to be in the position to buy back shares daily; in the EU, redemptions are required to be made twice in a month; these funds are more popular in the US as compared to other structures of mutual funds. On the other hand, closed ended funds issue shares at one time and are not required to buy back from the investors. The shares are listed on the Stock Market and investors may sell their shares through the Stock Market. Unit Investment Trusts have a combination of features of both open ended and closed ended mutual funds. These can be issued to the public only once and are established for a limited period. Investors can redeem their shares at any time with the fund or they have the option of redemption on the termination of the fund. Investors also have the option to sell their shares at the stock exchange.

In the UK, the state has encouraged individuals to take charge of their own retirement planning through the introduction of public pension funds because as of this time state pension only provides adequate money to keep the individual slightly above the poverty line. Pension funds are funds that are aimed at providing retirement income to the investors. There are both public as well as private pension funds in countries like the US and the UK. The difference is that a public fund is governed by the public sector law, while the private funds are governed by the private sector law. In the UK, pension funds have made more investment in index-linked gilts as there is a need for the pension funds to ensure positive returns for the investor over a long period of time. The only time in the pension fund history when the pension funds did not hold a greater proportion of holdings on gilts was in the period around the stock market crash of 1987. This reflects on the linking of the pension funds to the stocks and gilts in the UK market as pension funds are likely to invest more in these securities for the purpose of ensuring long term positive returns for the investor.

1. John C Coates IV, ‘Reforming the Taxation and Regulation of Mutual Funds: A Comparative Legal and Economic Analysis’ (2009) 1(2) Journal of Legal Analysis 591, 595.
2. Dunhong Jin, Marcin Kacperczyk, Bige Kahraman, and Felix Suntheim, Swing pricing and fragility in open-end mutual funds (International Monetary Fund 2019).
3. Ibid.
4. Ibid.
5. For differences between open ended and closed ended mutual funds see Emma Kirk, ‘Open-ended versus closed-ended funds-what's the difference?’ (2019) 33(1) Equity 8.
6. Gordon L Clark, Janelle Knox-Hayes and Kendra Strauss, ‘Financial sophistication, salience, and the scale of deliberation in UK retirement planning’ (2009) 41(10) Environment and Planning 2496.
7. Gordon L Clark and Roger Urwin, ‘Innovative models of pension fund governance in the context of the global financial crisis’ (2010) 15(1) Pensions: An International Journal 62.
8. Ibid.
9. Buckle and Thompson, The UK financial system: Theory and Practice (n) 137.
10. Ibid.

Hedge funds were first introduced in the US in the 1920s, with an early example of a fund resembling a hedge fund in Graham-Newman Partnership; although, it was Alfred W Jones who first came up with the term "hedged fund" and also created the first hedge fund structure in 1949. The term ‘hedge’ refers to the management of risk or hedging of risk through an aggressive management technique employed by managers of the fund. This makes hedge funds the most complex of all investment funds requiring a high degree of management by the fund manager. The history of hedge funds has shown some volatility due to the risks involved and the fact of hedge funds closing during the recessions of 1970s in the US market. However, hedge funds remain an important kind of investment fund in the US as well as in the UK. Compared to mutual funds, hedge funds are more aggressively managed. Hedge funds trade on liquid assets and apply complex trading and management techniques. Due to the complexity involved in hedge funds, regulators only allow institutional investors to manage hedge funds, thus ensuring a higher expertise and accountability in an otherwise less regulated investment fund type. In capitalist economies like the UK and the US, institutional investors managing hedge funds have billions of dollars of Assets under Management, which makes this kind of fund an important vehicle for investment of individual savings.

Hedge funds are generally termed as alternative investments. This term is used as a distinguishing factor of hedge funds from the more common investment funds of mutual funds. The EC Green Paper on Corporate Governance Framework has noted that in the recent times, the outlooks and approaches of the financial market have become short-term; leading to the development of strategies that are aligned to short term approaches, such as, hedge funds. Thus, there is a growth of hedge fund in the domain of investment funds. Hedge funds are considered to be useful because of liquidity and capacity to improve market efficiencies. Hedge funds also allow for the investors’ risks to be diversified and because the underlying notion of ‘hedging’ is involved, the risks associated with the investment can be minimised by the fund manager. However, this is not to say that the investments in hedge funds are completely risk free. There are risks that are involved in the operation of the hedge funds. Another important point is that being an alternative investment, hedge funds are not subjected to the same level of regulatory control as the other two kinds of investment funds. Hedge funds are considered to be private entities as compared to mutual funds and pension funds; they are not subjected to the same level of public disclosure requirements, as is required of the other investment funds for which reason, there is lesser transparency associated with hedge funds.

1. Mark Anson, The Handbook of Alternative Assets (John Wiley & Son 2006).
2. Ibid.
3. Ibid.
4. Alexander Ineichen, Absolute Returns: the risks and opportunities of hedge fund investing (John Wiley & Sons 2002).
5. T Lemke, GT Lins and KL Hoenig, Hedge Funds and Other Private Funds: Regulation and Compliance (Thomson West 2014).
6. Ibid.
7. Lemke, Lins and Hoenig, Hedge Funds and Other Private Funds: Regulation and Compliance (n).
8. M López de Prado and A Peijan, ‘Measuring Loss Potential of Hedge Fund Strategies’ (2004) 7(1) Journal of Alternative Investments 7.
9. John Kay, ‘The Kay review of UK equity markets and long-term decision making’, Final Report 9 (IMA 2012).
10. F Stewart, ‘Pension Fund Investment in Hedge Funds’, OECD Working Papers on Insurance and Private Pensions, No. 12 (OECD Publishing 2007).

All investment funds are prone to the same risks, although the levels of risks may vary from one type of investment fund to the other. These risks are also related to the regulatory challenges that can be posed by the investment funds because one of the key challenges could be to ensure that the investors are aware of these risks for which stringent disclosure regimes may be required. These risks can be classified as liquidity risk, manager risk, valuation, concentration, capacity, and leverage risk. Liquidity risk relates to the speed at which the commodity can be traded without impacting the market price of the commodity. Liquidity risk will mean that the commodity is not capable of being traded quickly. Liquidity risk is less with mutual funds because they can be traded quickly, even on a daily basis, whereas hedge funds have higher liquidity risk as the fund has a lock-in period which does not allow the investor to get his money back in the period. Manager risk relates to risks that are associated with the management style of the manager, which can be idiosyncratic and can be related to valuation, capacity, concentration, and leverage. Managers may choose to buy overvalued stock, thus involving a valuation risk, or they may concentrate too much into specific stocks and not diversify enough. These risks are all associated with the kind of style the manager has and uses for making investment strategy for the investment fund.

2.2 Regulatory comparison between the funds

At the outset, it is important to discuss how capitalist economy may differ in terms of responding to regulatory risks and challenges posed by investment funds. Regulation in a capitalist economy relates to the role of the state in the economy, which is perceived to be different from the role the state may play in a communist or a socialist economy. As this dissertation discusses the regulation of investment funds in a capitalist economy, it is also important to discuss the role of the state. Although key thinkers on this point may differ on the point of how far the state can regulate in a capitalist economy, the central premise is that the state is limited to a great degree regulating the market. A point of reference is Hayek, who argued that society is an extension of the market order wherein members of the society practice division of labour; in such a society, the state should not intervene in the economy to the extent of threatening the order of the society that is based on market, as this would impede the preservation of individual liberty and well-being. Hayek emphasised on the need to demarcate the legitimate actions of the state from the illegitimate actions. Hayek made an economic argument against too much regulation and central planning by the state as individuals should be allowed to decide the action they would like to take in those situations. The legitimate role of the capitalist state would be prescribing the general framework, within which economic activity takes place. The legitimate functions of the state include the provision of markets, institutions, and prevention of fraud; this allows the state to facilitate economic activity while protecting the interests, contracts and property of the individuals. The state should also provide for regulations of industries and factories like factory laws, and even at times state regulated private enterprise. Apart from these actions, the state should not interfere in the market economy and allow individuals freedom of action to enter into voluntary arrangements.

1. Ineichen, Absolute Returns: the risks and opportunities of hedge fund investing (n).
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
7. Ibid.
8. Mark Anthony Martinez, The myth of the free market: The role of the state in a capitalist economy (Kumarian Press 2009).

Keynes, on the other hand, argued for more intervention by the state in a capitalist economy compared to what Hayek would allow. He particularly based his arguments on the1929 Wall Street crash to justify state interventionism, which he argued was necessary to the role of the state in a capitalist society. The state should protect individuals against risks associated with investments. Keynes argued that government intervention is legitimate in the event of there being an aggregate demand failure which the market cannot control. Arguably, Keynes did not prescribe for interventionism unless the conditions requiring such interventionism could be established. Keynes argued that under no circumstances should the state assume ownership of production or even interventionism where not needed. Particularly with regard to the Wall Street Crash of 1929, Keynes argued that in the absence of self-correction in the market, the role of the state is to guide and support the private system. Thus, even Keynes when he argued for more state interventionism, he emphasised on the need to ensure that the state practices such interventionism only when the market is not self-correcting.

The gist of the above discussion is that a capitalist system limits the level of regulation or intervention by the state in markets. This has implications for the way a capitalist state would respond to the regulatory challenges posed by the investment funds. In a capitalist society like the United States or the UK, the regulation of investment funds by the state cannot be unbounded because that goes against the principle of individual choice and market freedom in a capitalist society as discussed above. The state can however, regulate certain aspects related to market funds. The balance is a fine one because while the state has to protect individual investors’ interests, contracts, and property through regulation of the investment funds, it cannot overregulate. Therefore, the position in capitalist societies is as summed as follows:

1. FA Hayek, The Road to Serfdom (Cornwall: Routledge, 2001).
2. Jeremy Shearmur, ‘Hayek, Keynes and the State’ (1997) History of Economics Review 68.
3. Hayek, The Road to Serfdom (n) 79.
4. Ibid 40.
5. Ibid 39.
6. Ibid 84.
7. JM Keynes, General Theory Of Employment, Interest And Money (Atlantic Publishers 2016).
8. Nikolaos Karagiannis and Zagros Madjd-Sadjadi, Modern State Intervention in the Era of Globalisation (Edward Elgar Publishing 2007) 32.

“investment companies are free to fashion whatever investment strategies they wish, with some limited restrictions, provided that any significant changes in that strategy are ratified by shareholders. While this regime separates government from private sector decision making as to which companies merit capital investment, as is fitting in a capitalistic economy, it is premised on the notion that investment companies will employ investment strategies that are competent and trustworthy, keeping in mind the interests of their shareholders.”

Thus, in capitalist societies like the UK, the investment funds are allowed to decide on their strategy, come up with investment products, and manage the funds with the minimal amount of restrictions so that the state does not unduly interfere with the private sector decision making. This is in keeping with the nature of the state in a capitalist society. However, even in capitalist societies, state is under a duty to protect individuals’ interests, property and contracts. In this context, the state may provide for regulatory mechanisms that ensure that the investment funds operate with transparency and accountability. In the following sections, the dissertation will discuss the regulation of the three investment funds, which are, mutual funds, hedge funds, and pension funds.

Of the three kinds of investment funds, mutual funds are the most highly regulated in both the US and the UK, and hedge funds are the least highly regulated. Regulation of the funds has responded to the issues and problems associated with the specific funds in the capitalist markets. As mutual funds and pension funds have experienced some scandals in the past, these have come to be highly regulated. At the same time, regulators have been caught between the need to regulate these funds and also provide conducive conditions for competition, and this is particularly relevant to mutual funds. Indeed, one of the views with respect to regulation to mutual fund regulation is that over regulation can affect the competitiveness of the mutual funds and make them less beneficial for investments by consumers.

On the other hand, the regulation of hedge funds is not to the same extent, making the regulatory responses to the two kinds of investment funds markedly different with one at the high end of regulation spectrum and the other at the low end of regulation spectrum. In the recent times, a mutual fund that mimics hedged fund strategies has also come into existence, which means that while the fund is subject to the regulatory regime applicable to mutual funds, it mimics the hedge fund in its actual investment strategy; the important point is that despite the copying of the hedge fund strategy, the hedged mutual fund underperforms the hedge funds because of the stricter regulatory policies associated with it while hedged funds are subject only to lighter regulation. The point to reinforce with respect to this is that there is some merit to the argument that mutual fund regulation can at times come at the cost of its competitiveness. In a capitalist society, which posits lesser government intervention and control and more freedom to the markets, this presents a problem for regulatory authorities because they have to balance regulation with competitiveness.

1. Karmel, ‘Mutual Funds, Pension Funds, Hedge Funds and Stock Market Volatility - What Regulation by the Securities and Exchange Commission Is Appropriate’ (n) 918.
2. William Baumol, Stephen M Goldfeld, Lilli A Gordon and Frank-Michael Koehn, The economics of mutual fund markets: Competition versus regulation, Vol. 7. (Springer Science & Business Media 2012).
3. Ibid.
4. Ibid.
5. Vikas Agarwal, Nicole M Boyson, and Narayan Y Naik, ‘Hedge funds for retail investors? An examination of hedged mutual funds’ (2009) Journal of Financial and Quantitative Analysis 273.

Literature indicates that in capitalist societies, regulatory measures have generally succeeded important events in the economy that relate to the Stock Market or securities available in the economy at the time. For example, the major regulatory measures in response to investment funds in the US succeeded the Wall Street Crash of 1929. Similarly, the 2007-8 subprime crisis and the ensuing global financial crisis led to more responses in the regulatory regime. The Wall Street Crash of 1929 prompted the US Congress to enact a number of important regulatory measures, many of which are still applicable today. The Securities Act of 1933 requires the registration with the Securities and Exchange Commission (SEC) of all investments sold to the public, including mutual funds. This comes with the requirement of transparency to the public through the issuance of the prospectus. The Securities and Exchange Act of 1934 requires that the issuers of securities, including mutual funds should report to the investors of the funds. The principal regulator of mutual funds, the SEC, was also established under this Act. The Revenue Act of 1936 includes rules regarding taxation of mutual funds. Thus, even though the question of competitiveness is important in a capitalist society, it may not be an effective argument against regulation where specific challenges or issues pertaining to specific investment funds come to light.

In the UK, mutual funds are called as open-ended investment company (OEIC), unit trusts, or investment trusts. The term open ended refers to the possibility for investors to pay money into the fund at any time allowing the fund to expand or contract at any time. OEIC can be listed on the stock exchange. In the UK, the mutual fund industry is regulated by domestic legislations that are made in this regard. The EU has a mutual recognition regime for facilitating free market for the mutual funds; this means that funds subject to regulation in one EU country can be sold the others, provided that these comply with the standards laid down by the Undertakings for Collective Investment in Transferable Securities Directive 2009. Such funds that are regulated in one EU nation and can be sold in other EU nations are called as UCITS funds. Thus, in terms of regulation of mutual funds in the UK, there are two regimes that are both relevant; the domestic law and the European law in the form of the directives. Mutual funds are such are governed by the domestic law, but those funds that are available across the EU countries, the Directive of 2009 is applicable. This maintains the free market principle of the EU market with respect to mutual fund investments. In 2014, the UCITS Directive 2014/91/EU has improved on the 2009 Directive.

1. Matthew P Fink, The Rise of Mutual Funds: An Insider's View (Oxford University Press 2013) 21.
2. Madura, Financial markets & institutions (n) 469.
3. Ibid 10.
4. Ibid.
5. Fink, The Rise of Mutual Funds: An Insider's View (n) 29.
6. Buckle and Thompson, The UK financial system: Theory and Practice (n) 143.
7. Ibid.
8. Mohammed K Alshaleel, ‘Undertakings for the Collective Investment in Transferable Securities Directive V: Increased Protection for Investors’ (2016) 13 European Company Law 14.
9. Ibid.

In the US, Investment Company Act of 1940 specifically relates to the governance of mutual funds. Also relevant is the Internal Revenue Code (IRC), which provides tax incentives to the investment companies that are regulated. In one study that drew a comparison between the regulation of mutual funds in the US and in the EU, the author found that the regulation of mutual funds in the US is stricter and more extensive as compared to the regulation of the direct investments or other collective investments and alternatives like hedge funds. The study also reported that the legal framework for mutual funds in the EU is either as restrictive or more restrictive than in the US with the difference that the competitive pressures in the EU have led to some flexibility in adopting and implementing regulations. The study also reports that compared to other kinds of investment regulation, mutual fund regulation in the US has been the most effective.

In the UK, pension funds have been a common investment strategy for retirement planning done through public as well as private pension funds. Two scandals in the pension fund industry of the UK have led to regulatory responses by the state. The first was related to Belling cookers, which used the investments in its pension fund for employees for cash injections into its ailing subsidiary in 1991. As the company was a trustee of the pension fund for its employees, it had fiduciary duty towards the best interest of the employees, which was compromised due to its actions. The company later went into liquidation and the employees’ pension fund was considerably depleted due to the cash injections into the subsidiary. The second incident involved the Robert Maxwell scandal in which £440 million from the pension fund he controlled went missing. Both these incidents bring forth two important points: first, in this period, there was significant control exercised by trustees over the pension fund and the breadth of the scandals indicate that there was possibly little oversight on how the pension fund was being regulated. Second, the managers of the pension fund are in the position of trustees, and as such they have to ensure that they prioritise the best interests of the beneficiaries. The Goode Report which was published after these two scandals were subjected to inquiry, led to the enactment of the Pensions Act 1995. This is the principal legislation that sets the terms for the governance of pension funds in the UK. This legislation lays down the rules concerning the composition and responsibilities of the trustees of the pension fund. The regulator under the Act is the Occupational Pensions Regulatory Authority. Trustees are required under the Act to make the statement of investment principle (SIP) and the minimum funding requirement (MFR). All fund trustees are required to produce their SIP listing the rationale and assumptions of the investment strategy. This is to be reviewed on an annual basis. The information on the level of funding and the scheme’s liabilities is to be published every year.

1. Buckle and Thompson, The UK financial system: Theory and Practice (n).
2. Ibid.
3. Coates IV, ‘Reforming the Taxation and Regulation of Mutual Funds: A Comparative Legal and Economic Analysis’ (n).
4. Ibid.
5. Ibid 593.
6. Buckle and Thompson, The UK financial system: Theory and Practice (n) 138.
7. Ibid.
8. Ibid.
9. Pension Law Reform (1993) Cm 2342.

Pension Funds have been regulated in the US through the Employee Retirement Income Security Act of 1974. The overarching principle under this Act is that the manager has fiduciary responsibilities towards the investors, which is tested on the basis of the legal standard of the trust law, which is that manager must apply the skill and diligence of a "prudent man" who has no influence of conflicting interests and has loyalty to the plan. The fiduciary duties of the pension fund manager have been described as having three components, which are: duty of loyalty to the investors and beneficiaries; obligation of the prudent man; and obligation of acting exclusively in the interest of providing benefits to the beneficiaries. In the US, regulation of pension funds also depends on state laws, where some variations may be found as to the permitted investment limits related to specific securities.

In the US, the regulation of different kinds of investment securities is done by different regulatory bodies. The SEC regulates mutual funds only and has no power of regulation over pension funds, and hedge funds. Pension funds are regulated by the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labour. Hedge funds are subjected to the least amount of regulation in the United States. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, has made it mandatory for hedge fund managers to register the fund and also has reporting requirements if the manager has more than $25 million dollars in assets under management. The Investment Advisers Act of 1940, as amended (Advisers Act) is the principal federal legislation that governs hedge funds. Hedge funds with Regulatory Assets under Management (RAUM) of US$100 million or more are required to register themselves with the SEC while the smaller advisory firms are to register with the relevant states.

1. Buckle and Thompson, The UK financial system: Theory and Practice (n).
2. Ibid.
3. Hans Blommestein, ‘Impact of institutional investors on financial markets’ in EP Davis (ed), Institutional investors in the new financial landscape (OECD 1998): 365-399.
4. Ibid.
5. Gregg v. Transp. Workers of Am. Int'l, 343 F.3d 833 (6th Cir. 2003), [840]- [841].
6. Lawrence J White, ‘Technological change, financial innovation, and financial regulation in the US: The challenges for public policy’ (2000) Performance of financial institutions: efficiency, innovation, regulation 388.
7. Vladimir Gonovski, ‘Mutual Funds-An Alternative Way Of Investing’ (2017) 19(1) Knowledge International Journal 427.
8. Ibid.
9. Natalya Shnitser, ‘Trusts No More: Rethinking the Regulation of Retirement Savings in the United States’ (2016) BYU Law Review 629.
10. Jacob Johnson, ‘Direct Regulation of Hedge Funds: An Analysis of Hedge Fund Regulation After the Implementation of Title IV of the Dodd-Frank Act’ (2018) 16(2) DePaul Business and Commercial Law Journal 3.
11. Ibid.

Hedge funds present a different kind of challenge in the context of regulatory regime because these are private funds and have traditionally not been subjected to the same level of control and regulation as other funds. One reason why hedge funds escaped much scrutiny earlier was because the contribution of these funds to the entire investment fund market was not significant. However, with the change in the focus and character of funds over the last two decades, and the concerns arising from the 2007 financial crisis, there has been increased regulatory scrutiny of hedge funds. In the US, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 made some changes to the regulatory regime of the hedge funds although changes in 2018 have watered down some of the restrictions that were originally envisaged under the Act. As there are different laws that govern hedge funds, different regulatory bodies are involved in regulation depending on the purpose and the law; these include SEC, the Department of Labour, Federal Trade Commission, Commodities Futures Trading Commission (CFTC), National Futures Association (NFA), and Financial Industry Regulatory Authority (FINRA), to name a few.

Permanent risks for the three types of Investment Funds and how the regulators (capitalist countries/economies) have previously dealt with them

General challenges

Generally, with all types of investment funds, the consistent risk or challenge faced by the fund manager relates to the ensuring of positive returns on investments in a market that can at times be unpredictable and volatile. This leads to pressures on the funds to perform and managers in trust of the funds are under this pressure consistently. At the same time, there is an argument that increased regulation of investment funds by the governments has had the impact of driving long-term investors, such as, mutual funds, into fixed income investments while neglecting equities; the impact of this could be damage to long-term returns and more pressure for the fund managers at times of financial stress, which can drive them to “standard types of behaviour such that risk is not diversified and equities are sold at a time when the risk premium is attractive depriving beneficiaries of the ensuing return”. In other words, there is an argument that too much regulation can be counter-productive for the interest of the beneficiaries over a long term as investment trusts become more conservative in how they approach equity investments due to attendant risks in such instruments, thus depriving the investors of the opportunity to make higher returns from their investments.

1. George Sami, ‘A Comparative Analysis of Hedge Fund Regulation in the United States and Europe’ (2009) 29 Nw. J. Int'l L. & Bus. 275.
2. Ibid.
3. Ibid.
4. Johnson, ‘Direct Regulation of Hedge Funds: An Analysis of Hedge Fund Regulation After the Implementation of Title IV of the Dodd-Frank Act’ (n).
5. Ibid.
6. Kay, ‘The Kay review of UK equity markets and long-term decision making’ (n) 8.

Another permanent challenge that is general to all three kinds of investment funds is related to the levels of transparency required and achieved. One of the questions that is raised in this regard is whether asset managers or fund managers should be subjected to a higher disclosure requirement than what is there in the law at this time. To this, one argument is that a higher disclosure regime would ensure that the fund managers are transparent in their activities and give access to the investors to all the information that is essential for them to decide whether to invest in the fund, continue existing investments or redeem investments. On the other hand, an argument is made that the level of disclosure to be made should depend on the client; if the client is institutional, then the manager is generally involved in carrying out the directions of the institutional client and may also be subject to specific mandates that are given by the institute, including on reporting requirements. It is argued that for institutional clients, the asset manager should not be put under general duties of disclosure as this will depend on the nature of contract between the client and the manager. In the case of retail funds, as the same level of dialogue between manager and client is not possible, there are regulatory rules on information sharing on charges, pricing, and portfolio composition such as under the Undertakings for Collective Investment in Transferable Securities (UCITS) which requires asset managers to produce Key Investor Information Documents for the purpose of enabling informed decision making.

In other words, there should not be any generalised reporting requirements or disclosure arrangement is how the argument is made. However, it can be argued that the second argument above is not really so different from the first because both accept that a certain degree of transparency is needed between the fund managers and the investors. It can be accepted that different kinds of funds would have different rules on transparency. For example in the UK, pension funds are governed by the Pension Act 1995, which requires that the trustee of the fund should prepare a Statement of Investment Principles that lists the principles based on which investment decisions will be made within the specific fund. Furthermore, the UK Stewardship Code has been established to lay down the good practices for engagement between the managers and the investors in the funds. For instance, the Stewardship Code Principle 1 Guidance provides that institutional investors are required to disclose their internal arrangements of integration of stewardship.

Mutual funds

There are five kinds of risks that are associated with investment in mutual funds. These are market risks, inflation risks, interest rate risk, currency risk and credit risk. These are discussed below.

1. Tkac, ‘Mutual funds: Temporary problem or permanent morass’ (n).
2. Kay, ‘The Kay review of UK equity markets and long-term decision making’ (n) 13.
3. Ibid.
4. Ibid.
5. Ibid.
6. Anna Tilba and Arad Reisberg, ‘Fiduciary Duty under the Microscope: Stewardship and the Spectrum of Pension Fund Engagement’ (2019) 82(3) The Modern Law Review 456.
7. Ibid.

Theoretically, mutual funds may mean something different, but in practice, mutual funds are characterised as shells, that the sponsor firm sets up and then manages. Mutual funds are theoretically organisations that see a group of shareholders forming the fund and playing the role in deciding on the investment strategy from time to time; but, in actuality, mutual funds have contracts with investment advisors for portfolio decisions and service providers for services such as, recordkeeping and underwriting. One of the risks that is posed through this system is that while mutual funds are managing the assets of the investors and are in a custodial position with respect to shareholder assets, they may not be the actual decision makers with regard to portfolio decisions as they have hired investment advisors for this purpose. In other words, the ones making the decisions on the holdings for the mutual funds, may not be the persons who are under a fiduciary duty to perform their work and making decisions that are normally in the interest of shareholders {THIS IS NOT COPIED FROM ANYWHERE, ITS JUST CONTINUATION OF THE ABOVE}. Also included in this issue is the fact that the investor funds are used for the purpose of paying towards the expenses of the funds including holdings and manager compensation. This leads to the demands for more disclosure of fund expenses.

Another permanent problem associated with mutual funds is that as mutual funds can be redeemed at net asset value (NAV), the liquidation of the assets is not the same as selling stock in a traditional company, or even an investment company working on closed-end mutual funds in one crucial sense. In mutual funds, the price at which an investor can liquidate his investment does not reflect the market’s perception of the management of the mutual fund. This provides both advantages and disadvantages. The advantage is that unlike shares which lose their value when market responds to bad decisions by the management of the company, mutual fund investors only have to redeem at the NAV on a given date and the market perception of the management does not impact the value of the NAV. The disadvantage is that investors are not under any immediate need to remove the advisors or management when they are taking bad decisions.

A third permanent challenge associated with mutual funds is that of conflict of interest. The conflict of interest arises because the fund advisor has a fiduciary responsibility to the investors as it is their money that is being invested through the mutual fund, but at the same time, he also has an interest in the maximisation of his own profit. This conflict of interest raises the possibility that the investor will try to maximise profits by hiring advisors and the payment of fees would be at the expense of investors. In the UK, a response to this issue has been made through the Capital Requirements Directive (Directive 2013/36/EU) as amended by Directive 2014/17/EU and Directive 2014/59/EU and which amended Directive 2002/87/EC. The manner in which remuneration is effected in investment firms are affected by the rules of the Directive 2013/36/EU as asset managers come which the scope of this Directive.

1. Paula Tkac, ‘Mutual funds: Temporary problem or permanent morass’ (2004) 89(4) Federal Reserve Bank of Atlanta Economic Review 1.
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid.
9. Ibid.

Conflict of interest can also arise because investors and advisors may have differing objectives from the investment in the mutual fund. Investors are driven by the objective of the maximising of their investment. It is therefore expected that investors would value higher returns but not like higher risk. On the other hand, the investment advisor desires to maximise his own profit. These objectives of the investor and the fund manager lead to a number of risks for the investors, which can be considered to be permanent features of the mutual fund challenges. These are discussed below.

Because of the differing objectives of the investors and the fund managers, one of the possible outcomes is that there could be differing levels of tolerance of risk of fund investors and the firm. The fund manager may be risk-neutral while the investor may be risk averse. This leads to a situation where the manager focusses on the returns without considering the risks involves. In the United States, this problem has been responded to by the Investment Company Act 1940, Section 13(a) prohibits the fund managers from making diversions from the stated strategy of investments; thus, funds cannot become non-diversified; funds cannot even vary from the statements or principles of investment policy already set out in the prospectus. Moreover, Rule 35d-1 provides that the funds that suggest investment in specific asset classes must then have close to 80% of such asset class holdings as specified. These principles are adopted to ensure that fund managers do not give in to their desire for profit maximisation by overinvesting in one or more stocks that they consider are potential high returns, regardless of the riskiness of such investment.

Pension funds

In the UK, one of the risk that is revealed in a research study on pension funds is that most of the trustees who manage these funds cannot be said to be experts in the area, meaning that the investments of the investors’ savings are entrusted at times to individuals whose decision making powers may not be adequate for the resolution of challenges that come in managing the investments in pension funds. Therefore, the risk of the pension funds being managed by those who are not completely competent to do so is one of the reported risks of the pension funds in the UK. The results of this study are important because these are based on empirical data collected from a sample of pension fund trustees who were given problems to solve. Two points are made out here. First, that pension fund trustees may not demonstrate capacity or the formal qualifications to be consistent or near- consistent in decision-making for investment strategy and management. Second, that pension funds in the UK may need to include independent experts in their panels for decision making.

1. Nick Bonsall, ‘European Overview’ in Paul Dickson (ed), The Asset Management Review (Law Business Research Ltd 2019).
2. Tkac, ‘Mutual funds: Temporary problem or permanent morass’ (n).
3. G L Clark, E Caerlewy-Smith, J C Marshall, ‘The consistency of UK pension fund trustees’ decision-making’ (2007) 6 (67) Journal of Pension Economics and Finance 86.
4. Ibid.

One of the risks that is identified in literature is the possible movement of pension fund investments into hedge funds. As per some estimates, close to 20% of European and US pension funds and almost 40% of Japanese pension funds are invested in hedge funds. The risks that are involved in the investment of pension funds into hedge funds include operational risks because of lower transparency levels in hedge funds; and risks associated with relation to returns and diversification.

Barring a few exceptions, pensions funds are allowed to be invested in hedge funds, but this has advantages as well as disadvantages for the investor. Some countries have made some financial policy to respond to the risks involved in the investment of pension funds in hedge funds. For instance, the Czech Republic has introduced a limit of 5% on risky investments; in Australia, Denmark and the Netherlands, investments into riskier options like hedge funds entail higher capital requirements. In the UK, the transposition of EU Directive 2003/41 EC on the activities and supervision of institutions for occupational retirement provision is one of the important steps taken for direct financial policy action for hedge funds.

An example of the risks presented by the investment of pension funds into hedge funds can be seen in the Enron case. Many pension funds in the United States had invested in Enron prior to 2000. These included some public pension funds as well as private pension funds. Public pension funds lost significant amount of retirement money of the investors after the Enron scandal. Notably, the “New York City pension fund lost $110 million, the Ohio state pension fund lost $114 million, the New York State Pension Fund lost $58 million”. The Enron case shows the risks that are associated with the investing of pension funds into hedge funds. The question is how far regulators can respond to these risks in a capitalist economy.

Another risk that is associated with the investment funds in general is that they may at times treat the interest of the investor as secondary to the interest of the funds. In the United States, the risk was responded to by the structuring of the board of directors under the Investment Company Act, which seeks to maintain independence of board by requiring close to 40% membership of the board by “independent” or “disinterested” directors (Section 77(e)). The purpose is to provide that the disinterested directors can maintain a check on company management; nevertheless, there is always a possibility that the disinterested directors will not be able to maintain such oversight or may be unwilling to do so. Yet another risk is that of reciprocal practices between mutual funds, which may see one fund purchasing the securities of another. In the United States, the Investment Company Act responds to this risk by prohibiting investment companies from purchasing securities of other brokers, dealers, underwriters or investment advisers (Section 12(d)(3)). This aims to restrict practices based on reciprocity amongst investment companies and between investment companies and other members of the securities industry; investment companies are not allowed to purchase securities in other investment companies, brokers, and dealers.

1. Stewart, ‘Pension Fund Investment in Hedge Funds’ (n).
2. Ibid 6.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
7. Karmel, ‘Mutual Funds, Pension Funds, Hedge Funds and Stock Market Volatility - What Regulation by the Securities and Exchange Commission Is Appropriate’ (n) 925-926.
8. Ibid.
9. L P Johnson, ‘Protecting mutual fund investors: an inevitable eclecticism’ in Research Handbook on the Regulation of Mutual Funds (Edward Elgar Publishing 2018).
10. Ibid.

One problem or challenge in the American context for the regulation of investment funds is that it is regulated through different regulators and for different purposes and constituencies; this has meant that there is a lack of consistency in how investment funds are regulated in the country. It is also important to note that the participation in the capital market through investment funds is not an activity that can be generalised in terms of the participants because these participants include diversity of financial institutions including banks, brokers, and fund managers. The result of this variation in the participants in the investment funds is that regulators for these different participants may also be diverse and similar rules may not be applicable to all. These different participants also have different business models and incentives, which makes it difficult to standardise regulatory framework that can encompass all these different kinds of investors.

1. Ibid.
2. Ibid.
3. Marc Labonte, Who Regulates Whom?: An Overview of the US Financial Regulatory Framework (CRS Report 2017) accessed .

Authorities

Foreign judgments

• Gregg v. Transp. Workers of Am. Int'l, 343 F.3d 833 (6th Cir. 2003).
• Zell v. Intercapital Income Sec., Inc., 675 F.2d 1041 (9th Cir. 1982)

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• Blommestein H, ‘Impact of institutional investors on financial markets’ in EP Davis (ed), Institutional investors in the new financial landscape (OECD 1998).
• Buckle M and Thompson J, The UK financial system: Theory and Practice (Manchester University Press 2020).
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• Fink MP, The Rise of Mutual Funds: An Insider's View (Oxford University Press 2013).
• Frankel T and Kirsch CE, Investment Management Regulation (Anchorage 1998).
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• Ineichen A, Absolute Returns: the risks and opportunities of hedge fund investing (John Wiley & Sons 2002).
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• Kidwell DS, Blackwell DW, Sias RW and Whidbee DA, Financial institutions, markets, and money (John Wiley & Sons 2016).
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• Stewart F, ‘Pension Fund Investment in Hedge Funds’, OECD Working Papers on Insurance and Private Pensions, No. 12 (OECD Publishing 2007).

Journals

• Agarwal V, Boyson NM, and Naik NY, ‘Hedge funds for retail investors? An examination of hedged mutual funds’ (2009) Journal of Financial and Quantitative Analysis 273.
• Alshaleel MK, ‘Undertakings for the Collective Investment in Transferable Securities Directive V: Increased Protection for Investors’ (2016) 13 European Company Law 14.
• Anderberg K and Brescia J, ‘UCITS IV: Reforms to the UCITS directive adopted by the European Parliament’ (2009) Euromoney’s International Investment and Securitisation Review 17.
• Bessler W and Hockmann HJ, ‘The Growth and Changing Role of Passive Investments: A Critical Perspective on Index Mutual Funds and Exchange Traded Funds’ (2016) 28(6) Zeitschrift für Bankrecht und Bankwirtschaft 406.
• Bonsall N, ‘European Overview’ in Paul Dickson (ed), The Asset Management Review (Law Business Research Ltd 2019).
• Clark GL, Caerlewy-Smith E and Marshall JC, ‘The consistency of UK pension fund trustees’ decision-making’ (2007) 6 (67) Journal of Pension Economics and Finance 86.
• Clark GL, Knox-Hayes J and Strauss K, ‘Financial sophistication, salience, and the scale of deliberation in UK retirement planning’ (2009) 41(10) Environment and Planning 2496.
• Clark GL and Urwin R, ‘Innovative models of pension fund governance in the context of the global financial crisis’ (2010) 15(1) Pensions: An International Journal 62.
• Coates IV JC, ‘Reforming the Taxation and Regulation of Mutual Funds: A Comparative Legal and Economic Analysis’ (2009) 1(2) Journal of Legal Analysis 591.
• de Prado ML and Peijan A, ‘Measuring Loss Potential of Hedge Fund Strategies’ (2004) 7(1) Journal of Alternative Investments 7.
• Foran J and O'Sullivan N, ‘Liquidity risk and the performance of UK mutual funds’ (2014) 35 International Review of Financial Analysis 178.
• Gonovski V, ‘Mutual Funds-An Alternative Way Of Investing’ (2017) 19(1) Knowledge International Journal 427.
• Hazenberg JJ, ‘A New Framework for Analyzing Market Share Dynamics among Fund Families’ (2020) Financial Analysts Journal 1.
• Jin D, Kacperczyk M, Kahraman M and Suntheim F, Swing pricing and fragility in open-end mutual funds (International Monetary Fund 2019).
• Johnson J, ‘Direct Regulation of Hedge Funds: An Analysis of Hedge Fund Regulation After the Implementation of Title IV of the Dodd-Frank Act’ (2018) 16(2) DePaul Business and Commercial Law Journal 3.
• Karmel RS, ‘Mutual Funds, Pension Funds, Hedge Funds and Stock Market Volatility - What Regulation by the Securities and Exchange Commission Is Appropriate’ (2005) 80 Notre Dame Law Review 909.
• Kirk E, ‘Open-ended versus closed-ended funds-what's the difference?’ (2019) 33(1) Equity 8.
• Langevoort DC, ‘Global Securities Regulation after the Financial Crisis’ (2010) 13(1) Journal of International Economic Law 799.
• Langevoort DC, ‘Taming the Animal Spirits of the Stock Markets: A Behavioral Approach to Securities Regulation’ (2002) 97 Newark University Law Review 135.
• Lowry M and Qian Y, ‘Mutual fund investments in private firms’ (2020) 136(2) Journal of Financial Economics 407.
• Morley J, ‘The separation of funds and managers: a theory of investment fund structure and regulation’ (2013) 123 Yale Law Journal 1228.
• Prentice R, ‘Whither Securities Regulation? Some Behavioral Observations Regarding Proposals for Its Future’ (2002) 51 Duke Law Journal 1397.
• Sami G, ‘A Comparative Analysis of Hedge Fund Regulation in the United States and Europe’ (2009) 29 Nw. J. Int'l L. & Bus. 275.
• Shearmur J, ‘Hayek, Keynes and the State’ (1997) History of Economics Review 68.
• Shnitser N, ‘Trusts No More: Rethinking the Regulation of Retirement Savings in the United States’ (2016) BYU Law Review 629.
• Stout LA, ‘The Unimportance of Being Efficient: An Economic Analysis of Stock Market Pricing and Securities Regulation (1988) 87 Michigan Law Review 613.
• Tilba A and Reisberg A, ‘Fiduciary Duty under the Microscope: Stewardship and the Spectrum of Pension Fund Engagement’ (2019) 82(3) The Modern Law Review 456.
• Tkac P, ‘Mutual funds: Temporary problem or permanent morass’ (2004) 89(4) Federal Reserve Bank of Atlanta Economic Review 1.
• Tuchschmid NS and Wallerstein E, ‘UCITS: can they bring funds of hedge funds on-shore?’ (2013) 15(4) The Journal of Wealth Management 94.
• White LJ, ‘Technological change, financial innovation, and financial regulation in the US: The challenges for public policy’ (2000) Performance of financial institutions: efficiency, innovation, regulation 388.

Reports

• Kay J, ‘The Kay review of UK equity markets and long-term decision making’, Final Report 9 (IMA 2012).

Websites

• Labonte M, Who Regulates Whom?: An Overview of the US Financial Regulatory Framework (CRS Report 2017) accessed
• .