Research Articles Base: Financial Hedge Samples

The Automobile Industry: A Global Perspective of Daimler Benz

BRAZIL AND MALAYSIA RISK ASSESSMENT FOR LUXURY CAR   Introduction             External risks can be an opportunity and threat for a firm.  Concentration of risks to the latter is relatively more probable for a multinational firm.  As a result, Vertex-Speed move to build a subsidiary in the foreign soil would tend negative risks to intensify difficulty of anticipation making it riskier venture.  Even though the firm has 10 years trading relationship with countries at hand (Brazil and Malaysia), this has been limited to exportation.  In addition, political and economic experiences of these countries will prove that major indicators have already evolved and stabilize from a decade ago.  Due to this ambiguities, this paper presents global perspective to the automobile industry, risk (political and financial) description and assessment of the two countries including their historical outputs and recommendation on how to manage the risk present in the selected country in which the new subsidiary of Vertex would be located.  The product is a prestigious executive automobile and so analysis is needed to verify its compatibility in the environmental risks present in the two countries.      The Automobile Industry: A Global Perspective The automobile industry continues to be globalized.  Daimler Benz merged with Chrysler Corporation and focused on integrating operations of individual subsidiaries scattered in the global landscape.  In addition, Ford had acquired Volvo that extended the former global brands to six.  The purpose of these global manufacturers and assemblers is to build economies of scale in performing activities in the value chain particularly in requisition of car components that make the 60% value of the finished product.  Thirty percent of auto market in the US is owned by foreign players while rivalry is tough for luxury brands.  Due to internationalization trend, auto companies are confronted with cultural issues especially the languages.  A concrete example was Ford’s translation in branding its new released car in Japan called Ka which means mosquito.  Apparently, the objective is to enjoy the advantages of scale and localization at the same time.  As a result, cost-effectiveness and value-adding capabilities attributable to the firm are enhanced ( 2003).               In the closing years of Australian car manufacturing in 1950s, there were at least 24 car manufacturers.  In the onset of the 21st century, however, they were only four as the previous decades illustrated declining trend.  The findings showed that from 1920 to 2000, falling government policy increases the likelihood of exit where exemption applies to a large manufacturer while aggravation applies to a small firm with large production plant.  The theme of Australian car industry of continuous decline of car plants was the ability of industry players to be efficient.  Although the 1940s level of 14 plants (the government protects local assemblers) was increased in 1960s to 16 plants (the government encourage foreign manufacturing), this suggested that foreign players gradually saturating the industry.  Due to this, at the first quarter of 1980s, the effect of globalizing the industry and entrance of relatively technological and experienced players in the West or those from Japan had caused decline.  This was flamed by the government’s minimal support and protection to domestic producers.  This resulted to managerial decisions to merge and identify strategic links leading to cost-effectiveness, at the same time, small number of companies ( 2001).                       The Japanese automobile industry is using the vertical keiretsu that is said to give them competitive advantage in the international arena.  Partly the cause of being the second largest FDI contributor to the United States, interdependence and coordination with competitors and strategic links that supplies activities in the value chain characterized association of such industry.  This aspect provides Japanese manufacturers enhancement in there OLI (Ownership, Location and Internalization) paradigm.  The automobile ancillaries of core Japanese manufacturers are able to overcome the risk (as it is founded that larger firms tend to invest abroad) of FDI due to their relatively small size because there is long-term relationship between the two.  With security of demand and cash flow, there were 97 keiretsu affiliations out of 106 in the US.  The restriction of US to use local components on Japanese manufacturers was resolved by including only a limited number of US suppliers while retaining the large number of keiretsu networks ( 1996).            Political Risks in Brazil             The country has the biggest supply and demand of automobiles in the South American continent.  The demand for luxury goods like automobiles is directly relevant to the spending patterns of the elite class situated at the tip of the consumer pyramid occupying around 2% of the total population or 1.1 million families.  They are considered wealthy with annual income 14 times greater than the Brazilian average and whose purchasing behavior is attached to product’s capability to be unique or/and reflect their social status.  Their number are concentrated in the Southeastern region (73.5%) of the country and scattered in the cities of Sao Paulo, Rio de Janeiro and Brasilia.  When the economy is performing well, it will affect the middle class’ incomes which are said to aspire purchasing patterns of their wealthy counterparts               Brazil requires 30% corporate tax and 15% withholding taxes against profit and dividend remittances.  It has double taxation treaty with the United Kingdom and other several countries providing additional incentive to foreign investors and managers which mean unnecessary decrease in their income resulting to higher motivation and possibly lower turn-over in managerial positions assumed to be from home countries.  Tariff ranges from 17% to 23% depending on the industry.  Automobile sector is highly dependent on the economy and share the over 10% of GDP in 1998 figures.  There are few restrictions in fund transfers while the economy accepts all sectors under foreign investments although registration to the Central Bank is required to every aspirant.  In 1990s, Brazil experienced trade liberalization that benefited consumer durables and installed the country as the world’s eight largest automotive industry.  It has intensive partnership with the Argentina and Mercosur where around 30% of its automobile produce is exported.  As a result, economic influence of the region to Brazil can be considered high as illustrated by decline in demand, in effect production, of automobiles when Argentina’s economy slowdown                              Bureaucracy is likely to skew towards excessiveness because of democratic type of governance.  The passing of law is undertaken by two separate but complementary bodies under bicameral system which can hamper the investment policies.  Corruption is guarded by several political parties and other public associations that guard the dealings of the government.  The experience of the country in the impeachment of its 1990s President Fernando Mello can suggest that its system secures the good governance of public servants.  In the process of such impeachment, political parties also had an impact, partly to spark public vigilance in the performance of executive officials.  The interaction of bureaucracy and corruption is a necessary course of a democratic government.  Without bureaucracy, corruption cannot be filtered.  On the other hand, without corruption, bureaucracy is unlikely be necessary.        Political Risks in Malaysia                In general, Malaysians are brand and prestige conscious while information about new products is gathered among close peers.  The experience in 2002 showed that Malaysian consumers are willing to buy luxury products like cars whenever the government supports their purchase through price and quality incentives.  Demand for automobiles can be affected by congestion of public highways that is a continuing concern for the country.  This could imply that purchasing decisions, even though supported by purchasing power, can be hindered by infrastructure underdevelopment   Malaysia’s corporate tax is 28% and considered one of the lowest in the region while raw materials are subject low to zero import duties.  Non-resident employees are subjected to 10% withholding tax.  The country is a main producer of vehicle parts, components and accessories to Asian countries like Thailand, Singapore, Indonesia, Japan and the UK and supplies parts to General Motors, Suzuki and Nissan among others (Malaysia Information).  The liberalization of auto industry started when the country aimed to challenge Thailand as the number one car maker in the Southeast Asia.  The plan gives auto foreign investors incentive on loans and grants but minimizes the upper hand of the national brand Proton Holdings which was protected by government arm .  Import tariff rates were also cut in the Southeast Asian countries from 20% to 15% due to the existence of Asian Free Trade Area (AFTA).  Protectionism in the industry against Thailand can be considered not much of pressure because of the latter production focused on trucks and commercial vehicles.  The Asian crisis in 1997 opened the minds of political leaders for globalization   Bureaucracy is relatively unlikely due to relatively small number of legislatures while passing of laws are expedited by the fact that the cabinet where the Prime Minister comes from is supportive to the latter, at least in majority.  However, this can be offset by the presence of the King (the religious leader of Islam) which can affect government affairs especially major investment decisions that can connote cultural infiltration which can be a huge concern for his rule.  Corruption is likely because of the fact that media is held by the government that can hamper transparency in transactions.  In 1998, the Deputy Prime Minister  was dismissed by the Prime Minister due to corrupt practices and sentenced and beaten in the prison afterwards.  However, without transparency and media independence, corruption cannot be thoroughly examined by the public especially the business sector.                    Financial Risks in Brazil             The United States is the largest investor in the country.  The Northern part is considered the poorest regions although investments are gradually building up to stimulate its local economy.  Privatization and emphasis on education are major themes in the present government.  However, the economy in history was proven volatile to trading partner’s condition and world affairs including Argentinean, Asian and Russian crises that affected its economic performance.  On the other hand, the present reforms of the government made its economy resistant to international economic shocks.  As a result, it continued to increase real wage and employment suitable for economic exchanges within the economy.  It has close relations with the IMF that helped it developed its economic reforms.                    Foreign direct investment in the country is ranked second to China in 2000 because of its price stability, privatization regimes and flexible policy in foreign capital.  However, this is skewed to service sector wherein 70% of FDI is classified.  The legislation makes no distinction between a foreign and domestic company and the principle of equal juridical treatment remains.  The country protects the intellectual property of foreign companies including technology transfer.  With these, it can be said that the automobile industry is partly saturated.  However, the technology of every new foreign firm can be considered a new development in car making that can provide a good political environment, market and technology ownership.        Brazil has the highest interest rate in the world at almost 20%.  It is meant by government intervention to hit its annual target of inflation rate at 5% down in 2004 of 8%.  It will not consider interest rate pressures like prices of certain goods to be able to maintain the inflationary level.  This caused foreign investments to flock in the economy possibly exploiting the barriers given to local businessmen when it comes to lending and establish a business.  However, this could also result to decrease credibility to Brazil’s Central Bank to leave to market forces the maintenance of equilibrium.  On the contrary, this high interest rate benefits the local economy because long-term credit assistance to local producers is not available making the opportunity for foreign investors to overtake local producers.  This would result to higher income tax remitted to the government, positive pressure to capital and current accounts and employment to local labor.              The real was hit by 2002 elections and depreciated its value.  The population’s move was spending their money by buying tangible goods or simply spending them outside the country.  By the time it reached it all-time low in 2002, the government integrated its efforts by targeting inflation and focusing on trade surplus in order to pay public debt that can relax foreign reserves in the hands of the state.  It adapted partly floating exchange rate to curb major factors that can affect the real drastically.  Tighter fiscal policy and monetary policy with inflation target also helped the real to stabilize into 2 real into .  As can be observed, Brazilian economy is highly integrative because policies in inflation control affected its currency and interest rate at the same time which gave several implications in the economy.  It Real Plan, as a result, can be considered a holistic strategy for the whole economy.                              Financial Risks in Malaysia             Malaysia actively sought WTO and AFTA deliberations to enhance its FDI level.  This is reflected in its five year plan that also seeks to find bilateral agreements.  The country is an open economy and shifted its focus to manufacturing since 1970s.  The economy continuously diversifies that includes automobile industry although its major produce is semiconductors and appliances.  The growth was enhanced by privatizing inefficient government-owned corporations suggesting competition among local and foreign firms with minimal protection.  The labor shortage can in the country can be an opportunity for home workers to proliferate their expertise in the host country with relatively ease of entrance.  Automobile producers and foreign investors can exploit the concern about current account deficit by producing goods that are previously imported in nature.  When they can manufacture in the local soil, they can be allowed and even hand down lucrative investments.  However, this can be hampered by the counter argument of slowing the booming economy of the country as to prevent too much size which the economy cannot handle.                         In 2003, the economy is boosted by government’s move to lower its interest rates due to declining export and weakening tourism industry.  This is intended for hotel owners to pump up their infrastructures and for the business economy as a whole.  Employee bonuses of public workers are also increase partly due to increase their purchasing power, an incentive for local producers to augment fund for foreign export.  The history of low inflation rates is true to the country that helped it avoid further financial difficulties in 1997 recession and also enhance its ability to stimulate the economy faster.  However, this advantage caused its economy to result to deflation since 1998 making imports more expensive to local consumers wherein inflation rate is close zero.  This could further result to delaying purchases due to speculation which can result to stagnant economy.                 It promotes import substitution and export strategy.  Japan is the major investor of the country.  Its foreign investment policy is relatively flexible to suit the current needs of the economy due to the absence of law under this category unlike Thailand.  The government has the final go-signal to foreign firm’s license to operate in the local soil.  The liberalization policy is also aimed to redistribute wealth to the indigenous people.  The protection from expropriation of foreign investments can be fully obtained through bilateral agreements that can negotiate the level of protection, compensation, transfer of capital and profits and other disputes between the private firm and the government.  However, this scheme, according to several studies is not antecedent to increase FDI rather a complementary feature of broader economic reforms.                Malaysian Ringgit is under managed float exchange system giving the government intervention capabilities when necessary.  In 2005, Malaysia lifted its dollar pegged currency transforming its currency closer to perceived market value.  This can enhance confidence of foreign importers on the real value of Malaysian exports stimulating trend.  It also an indication that the money of the country is gradually adjusting to its robust and economy which is brought about by consumer price inflation in 2005 at 3%, a 100% increase in 2004 level.  However, there is pressure to the government to intervene infrequently as to deter the improvement of its currency outlook from world partners’ view.  In 1990s, its Ringgit was cited to be undervalued against the dollar which was partly meant to provide incentive to importing foreign markets and boost its exports.        Assessment and Selection: Who has the Relative Upper Hand?  Political Risks Brazil Malaysia Attitude of Consumers Upper hand due to clear identification of market Lower hand due to needed support of consumers and over-congestion of roads Actions of the Host Government:     ·        Taxes Upper hand due to prevention of double taxation Upper Hand in 2% advantage <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="color: #480404; text-autospace: none"> Labor Regulations </li> </ul> Upper hand because of larger pool of local working class Lower hand due to smaller population <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="color: #480404; text-autospace: none"> Investment Incentives </li> </ul> Lower hand The industry is relatively saturated Upper hand The industry is in growth <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="color: #480404; text-autospace: none"> Protectionism </li> </ul> Lower hand due to saturation of industry Upper hand in tariff at least 2% and the relative rival Thailand mainly produces non-light vehicles Blockage of Fund transfers Upper hand due to minimal restrictions Lower hand due to requirement to enter bilateral agreements Bureaucracy Lower hand due to bigger number of legislatures Upper hand due to smaller number of legislatures Corruption Upper hand due to democracy Lower hand due to governmental ownership of the media; lost transparency Financial Risks Brazil Malaysia Current and potential State of the Economy Upper hand due to the learning curve and resistant economy Lower hand due to the fear of too much diversification Financial Distress and regulatory constraints Upper hand due to relatively high direct investment and equality of local and foreign investments Lower hand due to  plan to redistribute wealth to indigenous people Interest Rates Upper hand due to existence of long-term foreign debt platform and absence of local debt platform, at least in dollars Lower hand due to low interest rate and support to the local producers in times of economic difficulty Exchange Rates Upper hand due to integration in other economic variables Lower hand due to speculation of too much government intervention Inflation Upper hand due to control policies of targeting inflation Lower due to deflation tendencies Expropriation of investments Upper hand due to protection of Intellectual Property especially the technology Lower hand due to bilateral talks requirement and possibility of buying out the foreign firm                   As illustrated, Brazil has the most upper hands compared to Malaysia.  It falls short to provide relatively good investment environment to political factors such as investment incentives, protectionism and bureaucracy.  However, it outlasted the Malaysian economic indicators shown in financial risks partly because of its integrative plan that intended to stimulate one indicator in favor of another.  On the other hand, the Malaysian economy is hampered by its expropriation policies which require larger transaction costs for the foreign investor.  The economy also is impeded to growth by its infrastructures and labor force that diminishes economic indicators to steadily rise to a world competitive level.  Aside from these figures, geographical integration of Brazil is more suitable for lower transportation and communication costs for investors unlike the sea-divided Malaysia whose neighboring countries are separated by waters.   Managing Risks in Brazil   Managing Political Risks             The country has a relatively larger pool of labor that would transform to government support for foreign investor’s installing FDI.  However, the risk of not encouraging labor to the subsidiary due to competitive compensation all over the automobile industry could ensue.  As a result, intensive job vacancies campaign and lucrative packages should be bargained by the firm before or during the building of its business site.  This will prevent human resource problems in the beginning of operations so that the management can focus on more value-creating activities.  In addition, it should also set competitive level of compensation whenever it will choose to locate in the Southeastern region due to saturated car industry.  Otherwise, it can post premium when it decided to locate its plant in the emerging Northern region as to prevent cash outflow.                 As mentioned, Brazil’s automobile industry is very competitive.  However, the demand for luxury cars remained at low levels that can possibly an indication of wealthy family’s exclusive purchase or industry weakness on brand promotion.  If the former is true, the subsidiary could try to export its outputs that cannot be absorbed by local consumers.  On the other hand, marketing pursuits of the subsidiary should be carefully research according to the preferences of not only the wealthy people but also the upper to middle working class.  Prices in luxury cars in the country can be theorized as relatively lower than Malaysia due to competition.  As a result, the subsidiary can also take internal steps to be efficient in operations as to have optimal control on their prices.               Bureaucracy can have positive or negative effects to foreign investors.  Positive in times when the current investment policies is favorable to the investor, otherwise, the foreign firm would be obliged to lobby in the government or possibly to bribe officials due to unfavorable conditions.  In handling these risks, the subsidiary should first adjust its resources and capabilities according to the existing policies.  Opportunities should be identified in order to protect from new legislations.  Threats, on the other hand, should be leveraged as to prevent substantial looses in the future.  To enhance its ability to maintain in this course, it can conduct a number of social services to the local population to reflect its concern to them.  This can be in the form of donations, branding or actual field services.  In doing this, it can strengthen its citizen’s sympathy and government support leading to stronger lobbying force with little requirement of bribes.     Managing Financial Risks                      The high direct investment could add the flame to the already saturated auto industry.  As a result, it can hedge its profitability by investing in portfolio activities to provide the right combination to its financial structure and limit the effects of heavy competition.  It should also exploit its pricing advantage compared to imported cars that are also burdened of tariff fees.  However, when confronted by large multinational auto companies, pricing strategy should be shifted in the firm’s ability to differentiate its product from them or obtain focused differentiation strategy in the already tiny 2% of the population as initial number of potential demand.  Thus, volume sales can be set aside in order for minimal but effective profit would be returned.                      The resistant economy of the country that has fair dependence to durable commodities can deter the positive effects of global business environment like trade liberalization in China.  As a result, the subsidiary should be able to produce component parts and accessories for the global market as it cannot sell luxurious commodities in the emerging economies.  In this process, it would not be forced to concentrate its resources in the local market and developed economies providing a platform for combined competitive advantages.               Finally, the economic integration of government plan to influence economic indicators could defuse a bomb that can affect investments negatively.  The strong real can increase the consumption of imported automobiles. As a result, the subsidiary can loose the targeted market.  This is aggravated by decreasing inflation rate.  In effect, imported products seemingly are favorable for consumers rather while local producers are faced with decreasing return.  As the demand for luxury cars are based on car’s uniqueness, the wealthy market would seek to buy imported cars.  In this advent, the subsidiary should not close its doors to exporting especially on the emerging economies of South America.  Innovation and product design should be enhanced and internalized in order for its products to click in foreign markets.  These recommendations should also be based with the global examples above including merging possibilities to increase power, being efficient (Australia), and analyzing competitor’s activities and maintaining relationships with suppliers (Japan).       Conclusion                         Brazilian political and economic experience, relative stability and integration proved it is better investment climate than Malaysia.  It also have geographic advantages with regards to market access since the continent is compact.  Malaysia’s inability to handle diversification of industries denounced the profitability issues of the subsidiary, if not, the initial establishment to the infrastructure-congested country.  However, locating the subsidiary in the relatively advantageous Brazil does not connote risk-free environment.  The major risks to be leveraged are the inability to convince local labor, bureaucracy, saturation of the supply and demand on automobiles, insensitivity of its economy (either for positive or negative global economic events) and integration of its economic indicators.  In effect, it is recommended for the subsidiary to use its internal resources and capabilities to anticipate recurring and abrupt political and economic developments.    Credit:ivythesis.typepad.com

The Automobile Industry: A Global Perspective of Daimler Benz

BRAZIL AND MALAYSIA RISK ASSESSMENT FOR LUXURY CAR Introduction External risks can be an opportunity and threat for a fi...

CASE STUDY: FINANCIAL HEDGE

1. How the hedge will accomplish the goal of CFC of protecting the value of its foreign currency cash flows?             Spot exchange rates are risky for MNEs as the primary determinant of host country demand depends largely on the price of its goods, services, labor and entrepreneurship (GSLE).  Particularly true to unstable currencies, price competitiveness of an exporting MNE is pegged on fluctuations of host country’s currency.  If spot rate suggests that the host (say, Japan) currency depreciates, home MNE (say, based in US) GLSE becomes expensive since importers face a stronger dollar.  When sold to end-users, adverse reactions such as added-costs without added-value or simply look at the exporter’s products as unfair may result.  If the spot rate change is cyclical, the MNE is on a relatively comfortable zone.  However, when fluctuations are regular and the direction is unpredictable, the submission of MNE to trade depends on how much risk it can hold.  When MNE investors become anxious in achieving expected foreign cash flows, this is when hedging becomes useful.                 Since forward foreign currency contracts assume that parties tend to maximize their utility, it can also predict the expected spot rate of foreign currency.  This can be helpful for risk-averse MNEs especially when they are only engaging to get a break-even point or fair gains from trade.  It can simply quote its desired level of foreign currency valuation with respect to its GLSE.  Thus, international trade tends to be stable in both demand and supply since speculation is minimized in favor of arriving at forward rates.  In the financial market, forward rates can also result for investors to continuously invest over a period of with little slack time.  As a result, in-need MNEs can gain access to capital easily and readily.  This will also imply that investors are less speculating rather they become more firm-specific.  In effect, quality of products and efficiency can also be outcomes of forward quotations.   2.  What are the expected cash flows from the DM transaction if it is hedged in the foreign market?              CFC transaction of DM 2,000,000 falls in 90-day forward which results in US,146,600.           3.  How would CFC hedge DM in the money market?  And how much will it receive in the money market hedge?              In the money market hedge, the DM 2,000,000 will be subjected to two different interest rates from the currency loan; namely, US0,940.80 if acquired in prime rate while US9,193.60 if acquired in LIBOR (London).  In the former, the total money would be US,023,859.20 while the latter is US,025,606.40 with a difference of US,747.20 in favor of the LIBOR.    4.  Which is the best alternative for German transaction?             Interest rate differential has adverse impacts to multinational enterprises (MNEs) particularly on the aspect of seeking for capital in the financial market.  Disincentive will accrue to them if additional costs of monitoring will result from finding an efficient financial market especially when it is publicly traded in different countries.  When the interest rate of the home country is higher than the host country, home investors would shift to host country.  This will make financial markets more ambiguous for investors, thus, more complicated for their investment decisions.  In effect, the slack time used to speculate and identify arbitrage opportunities result to lesser capital source for MNEs.  This will in turn have adverse impacts on their production and distribution while innovation would not be possible.  Thus, interest rate differential posts bottleneck for the global economy.   The conditions of the German transaction are as follows: hotel client is opening, parts of order are already shipped, last consignment will be delivered on the second week of October 1991 and November 14 is the payment date.  This should be hedged in the money market because it is compatible to take advantage of the LIBOR’s lower interest rate.  Therefore, the risk to CFC of not getting the gain in investment in money market is mitigated.   5.  What is the expected cash flow in JY transaction in forward market?             The transaction in Japan falls in the 30-day forward which amounts to US,120,500,000.    6.  How inflows in JY be hedged in the money market?  What are the expected cash flows?             If quoted in prime rate, the expected cash flow would be US,049,349,600 while in LIBOR it will be US,051,703,910 with a difference of US,354,310.  Due to substantial amount of the transaction, it can be hedged in the money market through cross-country investment.   7.  What should be done in JY inflows?             Using the foreign exchange (FE) theory, however, concerned countries and firms can anticipate the level of differential through expectations on inflation rate.  Monetary authorities can simply influence local interest rates depending on the rate of inflation, thus, canceling or mitigating future interest rate differentials.  On the other hand, when differential is already established, forward exchange rates can limit speculations from investors as suggested by IRP theory.  Expected change on spot exchange rate can also be used for forward transactions as long as it is based on interest rate differential (IFE theory).  By these tools, arbitrage opportunity can be closed.  Therefore, it is advisable to use the forward currency alternative.                The following conditions exist in Japan transaction; namely, the client is large located in the country’s capital, payment will be given in September 1991 and the orders was already shipped in August 1991.  The client has large bargaining power position.  CFC cannot afford to loose this client that forward exchange is necessary.  The large base amount would also infuse too much risk when loan is not paid.  The stocks are issued and CFC has no other asset to pay the loan and its interest if the Japan client extends the payment period due to financial bottlenecks.    8.  What is the cash flow on Singapore transaction in the money market?             The net cash flow is US1,866.03.    Appendices   Germany Japan Singapore1 Sing 2 Sale price (DM)  2,000,000.00 1.5E+11  250,000.00  250,000.00 Remarks Hotel client, opening, parts of order alerady shipped, last consignment on second week of Oct 1991, payment will be given on Nov. 14 large trading company in Tokyo, payment will be given on Sep 18, 1991, shipped on Aug due on nov 23, 1991 from furniture retailer, shipped in the last week of july another from the same company on 2/17/92, shipment will be made on December 1991   Cash flow in the forward market           Contract Price Spot 30-day forward 90-day forward 180-day forward Germany            2,000,000.00          1,164,800.00         1,159,200.00        1,146,600.00         1,140,000.00 Japan 1.5E+11    1,121,100,000.00  1,120,500,000.00  1,118,100,000.00   1,115,250,000.00 Sing 1               250,000.00             143,700.00       Sing 2               250,000.00             143,700.00       TOTAL      1,121,934,000.00         PREVIOUS                       In the money market           Contract Price 1-month 3-months 6-months   Germany            2,000,000.00             140,940.80     Japan 1.5E+11 7.2E+07       Sing 1               250,000.00                 7,515.51     Sing 2               250,000.00                   8,018.46      On LIBOR         Germany               139,193.60         Japan 6.9E+07         Sing 1           Sing 2                         Total at prime rate Total at LIBOR rate       Germany            1,023,859.20          1,025,606.40       Japan      1,049,349,600.00    1,051,703,910.00       Sing 1               136,184.49         Sing 2               135,681.54                1,050,645,325.23    1,052,729,516.40                                                                            Credit:ivythesis.typepad.com

CASE STUDY: FINANCIAL HEDGE

1. How the hedge will accomplish the goal of CFC of protecting the value of its foreign currency cash flows? Spot exchange ra...

Can regulation on hede fund able to protect the investors and maintain securities market stability?

CHAPTER 2: REVIEW OF RELATED LITERATURE The Process of Hedge Fund Regulations Hedge fund regulation is the inspection and verification of the accuracy of hedge fund records and statements. Private businesses in the securities market conduct Hedge fund regulation procedures. Hedge fund regulations are conducted by a security company’s own personnel to uncover errors and also to check the latest trends in hedge funds. In large security companies, Hedge fund regulation is an ongoing procedure. A security company that trades stock on a registered stock exchange or is preparing to issue new shares of stock must submit to Hedge fund regulation. These companies are known as publicly traded companies. A Hedge fund regulation is used to give the public a true statement of a security company’s position regarding their hedge fund policies. It is made at least once a year. The Hedge fund regulations make sure that the security company has followed proper Hedge fund regulation procedures in its records and statements. They compare the current Hedge fund statistics with those of the previous year to determine whether the hedge funds are calculated consistently. If they are not, they present a distorted picture of the company’s financial position. Hedge fund regulation has a much longer history than many of the other developments that can be considered and the large security firms, in which many financial auditors work have become influential advisory institutions throughout the world.  Thus hedge fund regulation has provided the model which has influenced the design of regulating practice in many other fields. Although environmental, medical, or value for money audits are conceived as distinct from Hedge fund regulation, the latter continues to exert its normative influence as a centre of gravity for debate and discussion. And it is in the context of Hedge fund regulation that the dependency of acts of verification on judgment and negotiation is most apparent. The power of the Hedge fund regulation lies in its benchmarking potential for other regulating practices. In part this potential is realized indirectly through the work of advisors, for whom the Hedge fund regulation is a fundamental component of their expertise and whose advice in areas of control is shaped by it. But the influence can also be direct as entities such as hospital trusts, privatized industries, charities, and many other organizations become subject to an intensification of financial control and reporting requirements. This is an expanding domain, not just of neutral checking but also of judgment and of an evaluation of the fundamental purposes of organizations. Paradoxically, given the influential role of the Hedge fund regulation suggested above, its status as a practice is unclear. What do Hedge fund regulations produce and how are they effective? .   Hedge fund regulation is subject to expectations and demands which are, justifiably or otherwise, often disappointed. Nevertheless, the official procedural knowledge base of Hedge fund regulation has evolved in response to scandals and corporate failures in such a way that the essential puzzle of what audits produces their effectiveness remains hidden from view as an article of faith. Finally despite, and probably because of, this puzzle it is argued that Hedge fund regulation maintains itself as an institutionally credible system of knowledge. Notwithstanding crisis and scandal it satisfies the aspirations and demands of a variety of regulatory programs. Particular Hedge fund regulations may fail but the system as such cannot. The possibility of effective Hedge fund regulation is necessarily presupposed by regulatory intentions. Traditionally, Hedge fund regulation has applied itself to the domain of finance, but organizations are increasingly finding value from internal audits that monitor other aspects of their activity. Environmental and social audits, for example, have been championed by firms in response to the ethical concerns of both shareholders and the public in relation to the company’s impact upon the locality. Hedge fund regulation is growing in importance too, partly in response to recent major scandals such as the collapse of banks, and also in order to monitor the increasingly complex demands being made upon accountants.   However, Hedge fund regulation remains something of a mystery to those outside of the profession, and has become more specialized as accounting has become more sophisticated. For example, while best practice has evolved certain tools for analytical review or establishing Hedge fund regulation trails, an element of subjective judgment remains as auditors decide what evidence to include. Further, rules of thumb can never be ruled out. Hedge fund regulation risk has developed as an issue too, as the models for reducing the probability of mistakes being made on sampling, for example, become more subtle. In countries such as Canada these have changed dramatically. Here, Hedge fund regulation was introduced in 1980. The securities industry recognized the limitations of their science. They are not held responsible for detecting fraud, for example. Hedge fund regulation provides a degree of assurance, but not insurance, as to the financial position of the firm. Current Situational Analysis Today’s security market is characterized by highly competitive security companies which are all vying for investor’s loyalty. Firms are faced with the challenge to maintain their own competitive edge to be able to survive and be successful. Strategies are carefully planned and executed to gain the ultimate goal of all: company growth. However, external factors are not the only elements which influence growth. There are also internal factors, components working within the organization which shape the direction of the company.   Despite the economic and technological conditions that make it possible now to promote hedge funds in a larger investor market, there are other factors that still need to be considered for a security company to reach out easier to their target market. Looking into the characteristics and thought processes of the investors still holds as the most significant factor to be looked into by the individuals in the field of securities. The large scope of market can pose a hindrance to a successful strategy in terms of over generalized definition of the target or niche market. Investor behavior refers to the buying behavior of the investors who avail the hedge funds for various reasons. Investors around the world are different in various factors such as age, income, education level and preferences which may affect the way they avail of hedge funds. This behavior then impacts how hedge funds are presented to the different investor markets. There are many components which influence investor behavior namely: cultural, social, personal and psychological. These characteristics cannot be controlled by the security companies; therefore, a need to assess these elements in order to create an effective marketing plan.   For the business people and the people in the field of securities, the hedge funds being offered could be a good start in planning and executing an effective campaign. Knowing the hedge fund and its demands in the securities market as well as the investors who will likely avail and take advantage of the offer will open the possibilities for a campaign that will be most ideal in the market. The security companies should be conscious enough to know the characteristics of their hedge fund and its demand. There are hedge funds that are only utilized in a particular location because of the unique lifestyle of the investors. The character of the hedge fund, if properly studied, could be made and taken as an advantage rather than a drawback in gaining a larger number of target market. The security companies especially the people in the creative department should answer to such demands in the securities industry.    In this age of globalization and information technology, deciding which hedge fund or security to choose can be a problem. Competition is evident and intense, and the marketing and management divisions of security companies are surely giving everything they can to establish their hedge funds. A fine and well-advertised security might have a competitive edge from a lesser exposed security. But then, a lesser known security can also have an edge over price, given that they cost less than known security. However, in the end, the decision still lies within the investors.   In today’s security business world, the value and importance of investors is not something that should be set aside by companies. Hedge fund regulations would be incomplete without paying much consideration to the investors. Investors will and should always be a part of the Hedge fund regulation agenda of any security company. Because of the implications for profitability and growth, investor retention is potentially one of the most powerful weapons that security companies can employ in their fight to gain a strategic advantage and survive in today’s ever increasing competitive environment.   Investors can either be subjective or objective, testing the persuasiveness of securities and hedge funds. Security companies offering the hedge funds also play an important role in swaying the decisions of investors. The whole package or visual appeal of the security company can determine sales, or the added benefits of the hedge funds being offered. Furthermore, investors may choose particular hedge funds not only because these securities provide the functional or performance benefits expected, but also because these securities can be used to express investors’ personality, social status or affiliation (symbolic purposes) or to fulfill their internal psychological needs, such as the need for change or newness (emotional purposes). These are just some of the factors that affect investor behavior. They have been the subject of investor research for years, for instance, linking them with investor service and investor satisfaction, or the efficacy and persuasiveness of hedge fund regulations.   According to the , “Investors purchase hedge funds and other securities for the benefits derived from their use. While the study of economics focuses on outcomes, investor behavior emphasizes the process. Rather than assuming perfect conditions, researchers of investor behavior explicitly recognize the impact of situational elements on behavior and the variance among investors faced with the same conditions” Which means that investors buy hedge funds and securities for the benefits they reap out of it, the study of investor behavior investigates the steps, or the processes involved regarding the decisions made by the investor. Most investors regard the purchase of securities and hedge funds to be ‘high involvement goods’ that require complex decision-making,’ in purchasing securities, such as insurance or hedge funds, investors usually go through three key processes before they consider buying, and these are: information search, evaluation of alternatives and decision rules.   ,  and , emphasized that “investor behavior is best understood as problem-solving behavior.” Investor behavior is related to certain motivational behaviors that are aimed towards attaining a certain goal at the end. Goals, according to developmental psychologists are “cognitive representations of desired-end status which serve as standards in the control of behavior. Research on sensation and perception, attention, categorization, inference making, information search, memory, attitude and behavior, attitude formation and formation, conditioning and satisfaction have been undertaken to understand investor behavior. In the area of sensation and perception and attention, most works are confined primarily to visual or auditory processes. Among the studies on this area include those of  and (1994) who examined attention to packages on store shelves, as measured by eye fixations.   Based on the integrated model, culture influences behaviorr through its manifestations: values, heroes, rituals, and symbols. The combination of both etic and emic perspective on the manifestations, can basically reveal culture’s strong relation with investor behavior. The etic philosophy is based on the definition of culture as “the collective programming of the mind which distinguishes the members of one group or category of people from another’’ (, 1997). On the other hand, the emic philosophy stresses upon understanding issues from the perspective of the subjects being studied ( and , 2001). As cited from  (1988), this philosophy determines the coordinates of social action and productive activity, specifying the behaviors and objects that issue from both.   Values are basically the basis of one’s attitude or restriction in attitude. Some examples of values include freedom, pleasure, inner harmony, and happiness. Heroes, on the other hand, refer to icons in the society that may have an impact on people of different levels. Examples of heroes are sports figure or pop culture figures.  and  (2001) stated that heroes may influence investor behavior through their association with certain securities. Their involvement on the consumption of hedge funds and securities makes them important for investor behavior. Finally, symbols are equally important because different cultures have different symbols that they favor i.e. language, logos, signs, etc ( and , 2001).   Meanwhile, of all the components of hedge fund regulations, the most essential of all these elements but most often, the most overlooked is the definition of the target market. And yet, no one can proceed to a communication plan without answering the question of who do the security company have to convince to avail the hedge funds. Market segmentation is the identification of subgroups within the total market that the security company wants to target. This fully recognizes that investors of any security need, desire, want and expect different performance characteristics from securities in the category. It helps the company to position the hedge fund properly and prepare marketing strategies to satisfy a more focused range of investor needs and wants. Furthermore, it is also a factor in effectively using limited marketing resources, identifying unique market niches, improving profitability and helping to retain investor loyalty.   Security companies now face the challenge of making its target consumers respond accordingly to their hedge fund regulations. Those who understand its investors’ responses will have a great competitive advantage. The starting point towards this is through the stimulus-response model of investor behavior which involves examining the marketing and other stimuli in the consumer’s black box that translates into buyer responses. Marketing stimuli often consist of the four Ps of marketing: product, price, place and promotion while the other stimuli may include economic, technological, political and cultural factors which exist in the marketing environment. All hedge fund regulations should be directed to a particular target. This aspect suggests that in implementing hedge fund regulations, the company should clearly identify the targeted constituents and stakeholders, or to whom the hedge fund regulations should be directed. The purpose of this aspect is for the company to create or apply communication instruments that will encourage the market to purchase or patronize the hedge funds.   It is always important to know the characteristics and nature of the hedge funds offered by any security company because this will guarantee the success of the hedge fund regulations. But knowing the hedge fund alone can be detrimental any hedge fund regulations if the security companies themselves have no idea of the new target market they are trying to penetrate. The fact that there are really hedge funds that cannot be applied or utilized in a particular country should be a constant thought and reminder to the security companies with plans of gaining entrance and share of clients and investors. The hedge funds should be correctly classified as to whether they will be sellable in the new market. The lifestyle and daily routines of the investors in the new target market should be likewise considered to ensure that the hedge funds offered will be able to enter the new market in a different locality. Conducting researches and market studies on the purchasing power and the investor behavior of these people will benefit the security companies to conceptualize, transmit and channel the correct message to the target. Hopefully this will eventually attract the interest of the target audience and gain their loyalty to the hedge funds being made available to them.                The hedge funds should always be in synch with the tastes, lifestyle, economic status and purchasing power of the prospect foreign target investor market.  If the contrary is the case, it may also worthy to consider the time frame in which the hedge fund regulations will be duly employed and utilized in a foreign locality with different cultural orientation. Time is also the factor to be considered in conceptualizing and contextualizing hedge fund regulations as well as its launching or introduction in the market. Even though the concept of the strategy is a standardized hedge fund regulation, the people who will be responsible in executing the said project should be sensitive enough to investigate on the local environment. The same hedge fund regulations do not necessarily mean that the strategy, plans and approached that will be utilized is similar. Too much generalization about a locality and the people who will be the target of the hedge fund regulations may post danger on the success of the project. It is important to get close to the audience by knowing their culture.   Hedge Fund Regulations Defined             With the changing business practices and investor trends, security companies have continuously applied strategies that would help them adapt to these challenges. One of the known business alternatives is through hedge fund regulations. Several literatures had already been published describing hedge fund regulations’ purpose and advantage, particularly in the security business field. Basically, this strategic option allows security companies to gather important investor information, which they could use to improve their hedge funds provision. To achieve this goal, various hedge fund regulation activities had been introduced. As investors become more and more diverse, the use of hedge fund regulation for service enhancement has become more valuable as ever.               Although several security companies were able to achieve the benefit hedge fund regulations can provide, the strategy has certain downsides just like other strategic options. Some then noted that perhaps, what is appropriate is to give the investors the liberty to have themselves segmented for the company; in this way, forced marketing will no longer be utilized. In this paper, the function of hedge fund regulations and its approaches will be described. The specific flaws of the hedge fund regulations will also be identified in the discussion. Finally, the reasons for shifting to hedge fund regulation strategy will be explained as well. Hedge fund regulation is a strategy that helps security companies to stay abreast with its investors’ needs and concerns. In particular, hedge fund regulation helps security companies to respond in time and appropriately with the needs and concerns of the investors. At present, this strategy is more focused on the integration of long term capital management. The approach on hedge fund regulation covers all processes that a security company employs so as to determine, select, obtain, enhance and retain its investors by providing affordable hedge funds. Indeed, at present, hedge fund regulation is regarded as the integration of business processes, technological solutions and advanced analysis, which enables security companies to understand the clients from a multifaceted perspective.               Despite the demands and requirements of applying this strategy, security companies had been willing to integrate hedge fund regulation into their operations due to its benefits. One of which is the establishment of committed investors. Committed investors are more than simple repeat purchasers of hedge funds as they have an emotional connection to the company. These emotions may come in the form of trust, liking and believing in the organization’s capability to respond instantly and effectively to an investor’s concern (, 1998). The security company considers committed investors as valuable assets as they can possibly be a source of favorable word-of-mouth referrals. In addition, these investors are more resistant to competitors’ offers. Aside from this effect, hedge fund regulations provide a point of leverage to realize economies of scope. Committed investors are often amenable to line extensions. Leveraging the investor base can facilitate providing complementary hedge funds as well as providing up to higher quality substitutes. The ability of hedge fund regulation to reduce hedge fund costs has been explored as well. When hedge fund regulation is applied along with other work processes, the strategy is capable of reducing churn or turnover in a security company’s investor base.  Thus, better investor management can lead to higher hedge fund acceptance and lower costs, higher investor retention and lower investor replacement expenditures.   Among the most important aspects of hedge fund regulation application is long term capital management. This approach actually involves data mining processes wherein investor databases are developed; these in turn will be used by the security company in order to acquire new potential markets. However, as long term capital management becomes integrated to hedge fund regulations, its role to business has transformed as well. Long term capital management is no longer concentrated on acquiring new investors or identifying new markets; rather, it is now more centered in enhancing hedge fund productivity while strengthening relations with existing investors.   With this reformed role, long term capital management can now be used to cultivate existing investors for investor base expansion. The use of long term capital management practices in business has been integrated with hedge fund regulation as security businesses wanted to use a strategy that will help them build effective relations with the investors. These relations should be based on mutual trust, interest and healthy interdependence.   Long term capital management (LTCM) as an approach in hedge fund regulation has actually gone through other major changes. For instance, instead of measuring long term capital management success through campaign or transaction-based measurements, like cost per thousand or response rates, hedge fund regulation-based long term capital management now prioritizes various qualitative measures such as referrals, account penetration, hedge fund penetrations, investor satisfaction and loyalty.   In hedge fund regulation application, long term capital management is also used in order to reduce the number face-to-face contacts with the investors. Through this transition, unprofitable hedge funds that cannot be achieved through face-to-face calls can be prevented. The use of long term capital management for the hedge fund regulation strategy is also useful in establishing sustainable relationships with the investors at a lower cost ( 2001). Thus, in general, long term capital management-enabled security businesses to form a more stable investor community and provide hedge funds that are of value.   Long term capital management as an application of the hedge fund regulation strategy has been developed further as information technology was introduced for business utilizations. Hedge fund regulation is a powerful tool used by different security organizations around the world. Hedge fund regulation is utilized by different security companies whose objectives are to be the best company in their field.  In various countries worldwide, more and more security companies have been using Hedge fund regulations in order to be competitive. Irregardless of their company sizes, are trying to survive by means of Hedge fund regulations.  Aside from being a promotional medium, Hedge fund regulation is a tool for investor communications as well. Due to its interactive nature, Hedge fund regulation is an efficient method used in communicating with the investors. Security companies then started to concentrate on designing Hedge fund regulation strategies and employing interactive agencies that will facilitate their development of specific Hedge fund regulations as part of their integrated investor communication strategy.   Hedge fund regulation is considered to be the most expensive yet seems to be the most comprehensive strategy that every security company wants to implement and apply. At present, investors, particularly those in the security business arena, tend to engage themselves within the trend of rapidly growing technology so as to stay competitive. Hedge fund regulation is the latest approach for any security firm who wants to effectively market its hedge funds. In addition, Hedge fund regulation enables the company to be known worldwide since more and more people are able to access information. Within the security business world, where competition is strict, Hedge fund regulation is one essential strategy applied by most security companies.   While Hedge fund regulation had been applied in order marketing hedge funds local and internationally, this strategic option has also been used effectively by security companies in order to communicate with their investors. This technique has in fact been realized an effective instrument for driving revenues as well as obtaining investor retention and loyalty. In general the use of long term capital management for the Hedge fund regulation paved the way for a more cooperative information flow that help security companies understand the needs of their investors more accurately. In addition, long term capital management offers hedge fund discounts and other incentives to encourage investors to submit a personal data and avail of the hedge funds. The information gathered by the site on the other hand is used by the security company in developing hedge funds and customizing its regulations.   Flaws of Hedge Fund Regulations             Although the Hedge fund regulation has its beneficial effects, the strategy is also considered flawed. Specifically, certain issues had been raised in relation to Hedge fund regulation and it use of long term capital management practices. One of the major issues related to this matter is the concern of the investors on privacy. With the application and popularization of the Hedge fund regulation strategy, investors have been aware that Hedge fund regulation enables security companies to track down their likes and dislikes. However, without the provision of investor control, Hedge fund regulation approaches can affect investor relations. For instance, strict Hedge fund regulations can be considered by other investors as unwanted communication; as investors do not have the control as to how this unwanted strict regulation can stop, investors are often left irritated. Moreover, this issue often hinders others from availing hedge funds. Hence, it has been suggested that investors should provide sufficient information about themselves; investors should also be informed of the purpose for the Hedge fund regulation, how the information will be used and in what ways they could control the use of their personal information.             Hedge fund regulation is also flawed especially if the regulation is not applied with a holistic approach. This means that the Hedge fund regulation must be assimilated well to all the processes within the organization, from marketing to collections. This is said to be a challenge as most security companies employing Hedge fund regulations have this tendency to view this strategy narrowly, seeing it as a mere tactical series of transactions. In contrast, the effective strategic implementation of Hedge fund regulation requires the information from all related departments; this will allow the effective and intelligent use of investor information, which will eventually lead to the creation of strong investor partnerships or relations. The utilization of Hedge fund regulation in the company appear to based on the concept of relationship marketing but not on the features of the regulation, resulting to ineffective outcomes;  and  (1999) stated that this clearly stress the need for a holistic approach in applying Hedge fund regulation by involving the entire organization in the process.               In summary, the flaws of the Hedge fund regulations originate from its inherent feature and the insufficient skills companies have for its successful application. From the flaws identified, it is then essential that a better regulation system is developed; specifically, this should be focused on integrating greater control among the investors. Not only will this help address the issue on privacy but will also encourage the investor to willingly give their personal details for the company’s Hedge fund regulation use. In addition, the enhanced Hedge fund regulation should consider adding features that would allow investors to control the use of these information. This then makes Hedge fund regulation a recommended strategic choice.               Long term capital management or LTCM is actually part of Hedge fund regulation and applied for the same purpose; the only main difference is that LTCM puts the investors in control. Rather than asking the investors of their hedge fund needs and preferences, the investors are the one who freely give the details for the security company to use. The concept of LTCM is actually supported by certain basic tenets. One of which is that in LTCM, the investors are the owners of their information including their profile as investors, their hedge fund transaction history and other relevant business interaction data. Aside from these, instead of getting information sources from the investor side only as with the LTCM, the application of LTCM allows investors to gain important data about the security company including its hedge fund regulations, business units or departments and corporate account information. Finally, in LTCM application, the experiences of the investors should be prioritized; the needs and feelings of the investors should matter to the security company over the needs and objectives of the company. With the LTCM principle, the needs of the investors should be satisfied first in order for the security company to gain information. This is then followed by prioritizing the hedge fund regulations.               From this definition, it is clear how the integration of LTCM is an enhanced version of the hedge fund regulations. Based from the raised issues, it has been noted that LTCM approaches tend to increase the efficacy of the hedge fund regulations due to the investors’ concern on privacy. However, with the LTCM system, investors are given more authority on which detail do they wish to impart to the company and how they want these information processed. This makes the investors more willing to provide pertinent hedge fund information. In addition, the aim of LTCM is clear – and that is to satisfy the needs of the investors and let them be the one to establish the connection between them and the company. Having clear objectives and understanding of LTCM is essential in business as this will prevent hedge fund regulation issues such as uncoordinated application and lack on involvement. From this analysis, the function of LTCM is addressing various hedge fund regulations ssues has been emphasized.             Hedge fund regulations have become a common element among customer-oriented security companies. While this system has been effective through the application of LTCM approaches, hedge fund regulation still has certain flaws that companies must address. Specifically, privacy concerns, the use of standardized regulations and the absence of the holistic approach are some of the main flaws related to this strategy. In general, hedge fund regulation gives more control for the investors and elicits a clearer company objective, making it an effective strategic choice to address various hedge fund regulation issues. In conclusion, applying alternatives like LTCM require sufficient analysis and support form the organization; investors should then consider integrating these need when applying similar strategies. Lastly, investors are the security companies’ sources of opportunities and resources, thus, businesses must ensure that their customer-oriented strategies are truly directed for the benefit of their main targets.   Differences in Hedge fund regulation practices Readers of Hedge fund regulations of foreign security companies regulated by major international regulation firms assume a uniformly high quality of information. International differences in Hedge fund regulation objectives, standards and practice, however, result in varying levels of Hedge fund regulation assurance. Hedge fund users whose clients demand expertise in all phases of Hedge fund regulation and reporting matters whether domestic and international need to be aware of these differences. The development of Hedge fund regulation standards and practice in different countries is influenced by numerous factors including the nature of financing, the size and complexity of securities businesses and capital markets, tax laws and the legal environment. In the United States and the United Kingdom, many owners provide much of the Hedge fund regulation for public security companies, and capital markets are large and sophisticated. As a result, shareholders’ needs significantly influence Hedge fund regulation and independent audits, and private-sector bodies have a strong impact on Hedge fund regulation standard setting. In Germany, a small number of large banks and hedge funds traditionally supply most business capital, and ownership and voting rights generally are concentrated. One result is less demand for Hedge fund regulation and for a sophisticated, investor-oriented Hedge fund regulation system. Another is that the German securities market has less influence in establishing Hedge fund regulation standards which are set primarily by commercial laws. However, as in the United States and the United Kingdom, the securities market has played an important role in developing Hedge fund regulation standards. International differences in business, legal and cultural environments also have led to varying Hedge fund regulation objectives. Consistent with a strong investor orientation, the Hedge fund regulation objective in the United States is to express an opinion on whether the Hedge fund regulation present fairly, in all material respects, financial position, results of operations and cash flows in conformity with generally accepted Hedge fund regulation principles. The strong presumption is that to present fairly, Hedge fund regulations must conform to generally accepted Hedge fund regulation principles. Departures are permitted only in rare instances.   Like the United States, the United Kingdom has investor-oriented public Hedge fund regulation, a strong regulation tradition and a large, well-established securities industry. However, in contrast to the United States, where Hedge fund regulation setting is highly concentrated in the private sector, it is United Kingdom company law in addition to the private sector that influences Hedge fund regulation practice. Thus, although the Hedge fund regulation’s overriding objective is formation of an opinion on whether the Hedge fund regulations give a true and fair view, the U.K. auditor also expresses an opinion on whether the Hedge fund regulation have been properly prepared in accordance with the Securities Acts. In Germany, lenders and institutional owners have direct access to company information, reducing the need for detailed financial reports and Hedge fund regulation standards designed to protect a widely dispersed shareholder and creditor base. Thus, until recently, the sole Hedge fund regulation objective in Germany was to judge whether the Hedge fund regulation records, statements and management report complied with laws and regulations. In 1987, the true and fair view concept became part of German Hedge fund regulation requirements as a consequence of incorporating the European Union’s fourth directive on individual company accounts into company law. The directive’s overriding requirement is that Hedge fund regulations give a true and fair view of a company’s financial position and the results of operations, making both compliance with company law and conformance with a true and fair view of Hedge fund regulation objectives in Germany.   Although Hedge fund regulation standards address similar topics in the three countries, their content, level of detail and application in practice vary considerably. U.S. Hedge fund regulation standards are highly specific and comprehensive. German Hedge fund regulation standards are briefly stated and function at a much more general level. U.K. Hedge fund regulation standard setters promote principles rather than rules; U.K. Hedge fund regulation standards are much more extensive than German standards, but they are less so than U.S. Hedge fund regulation standards. As a result of the close relationships between corporate managers and their external accountants in Germany, several Hedge fund regulation practices differ considerably from those in the United States and the United Kingdom.   Numerous other differences exist. Some argue they will lead to different levels of Hedge fund regulation assurance, in spite of unified Hedge fund regulation approaches and programs of international securities firms. For example, in Germany, relatively few related party disclosures are required in the Hedge fund regulation reports. The United Kingdom requires disclosure of related party transactions in the Hedge fund regulation and recently issued standards on regulating them. U.S. Securities Acts also require Hedge fund regulation to disclose material related party transactions other than compensation arrangements or similar items in the ordinary course of business, and U.S. generally accepted Hedge fund regulation standards include detailed guidance on procedures auditors should consider to identify related party relationships and transactions. Hedge fund regulations also lead to international differences in regulating assurance levels. In the United States, the Securities and Exchange Commission considers conformance with SEC and Generally accepted Hedge fund regulation standard to be so important that Hedge fund regulation of listed companies can’t have reports qualified for scope limitations or nonconformity with SEC. The German and U.K. securities markets do not have similar restrictions. However, the London security industry subjects’ new applicants that have had a qualified Hedge fund regulation opinion in the previous three years to additional requirements ( &  1996). There are philosophic differences in Hedge fund regulation between the United Kingdom and the United States. Another difference between the United Kingdom and the United States is that the Securities Acts apply to all corporations, public or private. One other difference between Hedge fund regulations in the United States and in the United Kingdom is that the latter has, for a relatively long time, commented on the social responsibility aspects of a company’s activities ( &  1993). Hedge fund regulations in the United States have made little mention of the impact of the company on society. In recent years, there has been a growing practice for U.S. securities companies to be more proactive in making such statements. Another area of potential confusion between U.K. and U.S. Hedge fund regulations is in language. The U.K. term ordinary hedge fund is the same as common hedge fund in the United States. This matter of differences in terminology becomes bothersome for non-English speaking companies that desire to issue an English version of their Hedge fund regulations. Usually, the purpose of the English version is in preparation for raising funds in the London and/or New York capital markets, or to attract American or English investors. The simple decision to translate a company’s Hedge fund regulation into English is complicated by which form of English is more suitable for presentation purposes ( &  1993).   Australia has historically been heavily influenced by British Hedge fund regulation practices. The Securities Act of 1961 contains the concept of the accountability of directors to shareholders, including the stipulation that annual Hedge fund regulations must be true and fair. In Australia, the courts frequently decide on what is to be construed as true and fair in Hedge fund regulation practices, not the professional regulation societies. These organizations compete for both membership and influence, which complicates the process of arriving at generally accepted Hedge fund regulation principles. These are established by the SEC, which is jointly sponsored by the two professional organizations. Recent decisions have more or less mirrored changes in Hedge fund regulation practices taking place in the United States, which is why Australian Hedge fund regulations is a mix of U.K. and U.S. Hedge fund regulation practices. Australian Hedge fund regulations contain a section on social responsibility and Australian companies also publish Hedge fund regulation for their investors.  Canada is a member of the Commonwealth of Nations and its companies are organized under legislation similar to the Companies Acts of Britain. However, corporate legislation emanates from dual levels of government: federal and provincial. Similar to a choice of English or French as an official language, a security company has a choice as to which provincial or federal corporate law applies when the company is first incorporated. A company actually has a choice of thirteen sets of law that includes federal law, or the applicable law in ten provinces and two territories. The choice depends on a number of factors including the scope of operations, nature of the business, disclosure and reporting requirements, the structure of the shareholdings, and the residences of the directors. The Canadian SEC is an umbrella organization governed by representatives of the provincial organizations. The provincial organizations have delegated to the national organization the setting of Hedge fund regulation standards for the nation. The Canadian SEC speaks for the Hedge fund regulations on national issues and settles issues between the provincial organizations. Its declarations are given statutory recognition, that is, are legally binding. The nature of Hedge fund regulation requirements differ among corporations; depending on which of the thirteen sets of legislation apply. Although this sounds confusing, there is apparently little difficulty in the preparation of Hedge fund regulations. Only certified members of the Canadian SEC can conduct Hedge fund regulations.    There are other organizations such as the SEC, whose members generally approve Hedge fund regulations. As one might expect, Hedge fund regulations issued by the Canadian SEC are influenced by what occurs south of the border. However, the Hedge fund regulations in the United States and Canada are not exact replicas of each another. In Canada, Hedge fund regulations are required only for large publicly traded companies, whereas in the United States, all publicly traded companies must be audited. France is a nation of many small security companies. Hedge fund regulations are uniform throughout the country. The Hedge fund regulations of the country are essentially a national cookbook for regulations, with detailed instructions on such matters as valuation methods and procedures, disclosure rules, and the standard forms to be used by accountants. This follows, conceptually, the French practice of codifying its laws. In France, Hedge fund regulations have precedence over the concept of a true and fair presentation of financial results. In fact, Hedge fund regulations are usually the tax returns for a company. Yet, as has already been discussed, there are frequently major differences in Hedge fund regulations in the portrayal of the Hedge fund regulations of a company ( &  1993).   Japanese Hedge fund regulations originate from two sources. Prior to World War II, the major influence was the German Commercial Code of 1889. Following World War II, the U.S. inspired Securities and Exchange Law became the foundation of how Japanese companies were to report Hedge fund regulations to their shareholders. Both German and American influences can be seen in current Japanese Hedge fund regulations. The German influence is seen in the control exerted over Hedge fund regulation practices by government ministries, the lack of public availability of private companies’ accounts, uniform formats for published accounts, dominance of tax rules in determining hedge funds, and the establishment of legal reserves. There is more emphasis on the form, or layout, of hedge funds than substance, or depth of meaning, in portraying the Hedge fund regulations of a company. When form over substance prevails, the true and fair view suffers ( &  1993). The Netherlands is a small nation whose commerce is largely intertwined with that of its neighboring states. Hedge fund regulations are closely related to those practiced in the United Kingdom. Dutch SEC requires that Hedge fund regulations of companies show a true and fair picture of the financial position of the company with all items appropriately grouped and described. Hedge fund regulations must be drawn up in accordance with sound business practice, which is interpreted to mean that regulation principles must be acceptable to the business community. The process of Hedge fund regulations and determining results are to be disclosed. Hedge fund regulations are prepared on a consistent basis, with disclosure of material effects of changes in regulating principles. Comparative financial information for the preceding period must be disclosed ( &  1993).   Hedge fund regulation standards vary from country to country largely because of differing business practices, fiscal systems, culture, tradition and company law. Worldwide uniformity of Hedge fund regulation standards is an objective of the SEC and the International Regulation Standards Committee. A number of developing countries have adopted the international Hedge fund regulation standards set by these bodies as benchmarks for their national standards; however, developed countries are moving more cautiously from their own well-established standards to international standards. Thus, Hedge fund regulation diversity will continue to be a fact of life (,  &  1997).   Long Term Capital Management (LTCM) The LTCM is a description and discussion of the responsibility of the security companies to consider capital management in the hedge fund regulations. It is divided into different titles that includes an introduction; the description of the characteristics of capital management; description of the responsibilities of those charged with governance and of management; the inherent limitations of a capital management in the context of hedge fund regulations; the responsibilities of the auditor for detecting material misstatement due to fraud; professional skepticism; discussion among the engagement team; risk assessment procedures; identification and assessment of the risks of material misstatement due to fraud; responses to the risks of material misstatement due to fraud; evaluation of hedge fund regulations evidence; management representations; communications with management and those charged with governance; communications to regulatory and enforcement authorities; auditor unable to continue the engagement; documentation; effective date.   This standard distinguishes the importance of long term capital management in hedge fund regulations and describes the two types of capital management that are relevant to the auditor, that is, statements resulting from appropriation of assets and statements resulting from effective hedge fund regulations; describes the respective responsibilities of those charged with governance and the management of the entity for the implementation of long term capital management, describes the inherent limitations of long term capital management in the context of hedge fund regulations, and sets out the responsibilities of the company for detecting material statements due to long term capital management. This standard also requires the security company to maintain an attitude of professional skepticism recognizing the possibility that long term capital management in hedge fund regulations could exist, notwithstanding the company’s past experience with the entity about the honesty and integrity of management and those charged with governance. Moreover this standard requires members of the engagement team to discuss the susceptibility of the entity’s hedge fund regulations to long term capital management and requires the engagement partner to consider which matters are to be communicated to members of the engagement team not involved in the discussion.   The standard requires security companies to do certain things such as performing procedures to obtain information that is used to identify the benefits of long term capital management in hedge fund regulations; identifying and assessing the benefits of long term capital management in hedge fund regulations at the financial statement level and the assertion level and for those assessed benefits that could result in effective hedge fund regulations, evaluate the design of the entity’s related controls, including relevant control activities, and to determine whether they have been implemented; determining overall responses to address the benefits of long term capital management in hedge fund regulations at the financial statement level and consider the assignment and supervision of personnel, consider the regulation policies used by the entity and incorporate an element of unpredictability in the selection of the nature, timing and extent of the hedge fund regulation procedures to be performed; designing and performing long term capital management in hedge fund regulations to respond to the risk of management override of controls; determining responses to address the assessed benefits of long term capital management in hedge fund regulations; considering whether long term capital management may be indicative of success; obtaining written representations from management relating to benefits of long term capital management in hedge fund regulations; and communicating with management and those charged with governance. The LTCM provides guidance on communications with regulatory and enforcement authorities. The standard provides guidance if, as a result of long term capital management in hedge fund regulations, the investor encounters exceptional circumstances that bring into question the company’s ability to continue performing the hedge fund regulations. Lastly the standard establishes documentation requirements. Effective Hedge Fund Regulations Most leaders know security companies need to change in order to survive and there are many programs for launching such efforts, such as implementing hedge fund regulations. However, experience has shown that over the long haul most hedge fund regulations do fail. They are expensive to implement, offer a poor return on investment and fall short of achieving the organization’s goals to better enhance good business performance. This happens because security companies don’t plan for sustainable hedge fund regulations. In other words, they succumb to what investors often refer to as “program of the week” syndrome. Most hedge fund regulations, no matter how carefully planned, and are doomed before they even begin because they are designed as one-time events. They do well enough in temporarily focusing excitement and energy around a given program, and the initial results can seem very promising, but the lack of long-term follow through is their fatal flaw. The problem with hedge fund regulations is that investors get the message that they have benefits to attain but that they must also pay attention to the hedge fund regulations and that don’t see the change as something integral to their daily activities but as something quite outside of it. If hedge fund regulations in have arrived with fanfare and faded to obscurity in the past, investors may even see the new initiative as something to merely be endured until they can return to their normal routine. Such cynicism hobbles the success of any current or future hedge fund regulations. Successful hedge fund regulation is very much within the grasp of any security company if senior management is willing to think long-term. For hedge fund regulations to be sustainable it must be completely integrated into the very structure of the security company and its performance system from the CEO to the investors. Business Management must be committed to both the philosophy and the implementation of hedge fund regulations. The strategies for the success of hedge fund regulations: Ø      Position change as a basic element in the organization’s formal hedge fund regulations Ø      Design programs to fully integrate outcomes into the core hedge fund regulations Ø      Identify hedge fund regulations related performance objectives Ø      Define clear hedge fund regulations related performance measures for management levels Ø      Tie hedge fund regulations outcomes and competencies to manage business performance and its role to organizations change Ø      Express hedge fund regulations objectives and descriptions of progress in the language of business Ø      Establish growth strategy in business Henceforth, in order to successfully graft hedge fund regulations onto a security company’s performance system, a strong, efficient performance core must already exist. No security company with a weak performance system will ever make hedge fund regulations work effectively and will only result in frustration and wasted money and that before the company undertakes hedge fund regulations they should first take an honest look at their state of readiness. Most investors have a hard time dealing with hedge fund regulations, especially the incessant and unpredictable kind that experienced. A core competency for today’s security company is the ability not just to tolerate hedge fund regulations, but to actually generate and proactively manage it. If security companies lack the skill, it will be difficult for hedge fund regulations to filter effectively throughout the organization. Thus, there are organizations that are implementing hedge fund regulations successfully and reaping spectacular benefits as a result which made an integral part of that business’ operations and the company’s core business performance system. Today, security companies must adapt to a barrage of external challenges of seemingly perpetual improvement efforts and must develop a capacity to change within a permanent state of flux and be able to tackle hedge fund regulations head on. Whether entering new markets, expanding product, merging with competitors or implementing technologies across the global enterprise, security companies must be able to successfully launch fundamental transformations within their organizations. Moreover, some hedge fund regulations falter because security companies fail to communicate effectively with their investors. They do not align their investors with strategic priorities or ensure that investors understand the impact they have on the organization’s performance. Neither do they develop hedge fund regulations that guide the investors along the journey to the new way of working. In short, most security companies fail to implement fundamental hedge fund regulation principles. Furthermore, they recognize the need to incorporate transition management into a business solution from day one not just after a solution that has been implemented.  Strategic Change The need for a security company to undergo significant hedge fund regulations can be brought about by some reasons: poor performance, environmental turbulence and uncertainty, resource shifts, risk reduction, simply managerial preference. Regardless of the impetus for such a change, the need to align aspects of the security company with the new strategy is of vital importance to overall effective business performance and survival. Thus, experts argue that defining hedge fund regulations and implementing it is not enough, but often requires a transition management to reduce problems, make clear why hedge fund regulations is needed and increase the prospects of successful change in business performance. Experts suggest security companies are continually changing, although change is not always controlled. Some however, asserts that the process of continuously adapting to the hedge fund regulations in a firm’s environment is the essence of strategic management. It is an adaptive process and one that is predicated on the resources that it commands, both externally and internally. Furthermore, the nature of hedge fund regulations within influences the state of adaptation sought. The effective hedge fund regulations must include culture evaluation and management if strategy is to be successfully adapted to the organization. Experts propose that hedge fund regulation results, in part, from retention of those elements that have worked well in the past, and selection of viable new elements, based on administrative and cultural mechanisms. Whereas in the former an organization’s character can be maintained through induced processes, in the latter new autonomous processes will be necessary to foster the new character or elements required and the induced processes concern initiatives that are within the scope of the organization’s current hedge fund regulation. The autonomous processes concern initiatives which emerge outside of the current organization realm and that provide the potential for business improvement.         Evaluate the Nature of the Hedge fund regulations What is the nature of the hedge fund regulations that have made change necessary in order to maintain effectiveness? Why was hedge fund regulation warranted? The sensible security company must also evaluate the magnitude of the hedge fund regulation and the conditions that have precipitated change. It would be necessary to shift emphasis away from mainframe performance towards the ideal hedge fund regulation. For one, the orientation of investors had to move from an emphasis on service to hedge fund regulations. The shift was dramatic and had implications for the entire focus of effort and company orientation. Identify Key Elements in Hedge fund regulation The key factors of success should be directly related to organizational effectiveness, and broken down to their most basic elements. At this early stage, investors are not yet of primary concern, but emphasis in scanning should be placed on identifying key areas where specific hedge fund regulations may be most important as the key elements was business marketing as security companies are forced to target their market and pursue it by identifying critical variables needed for effectiveness in the new environment, the organization’s management began to see a new emphasis that was necessary for business performance.   Measure Key Hedge fund regulations In other cases, measurement of hedge fund regulations could be as easy as qualitatively determining present existence, while in other cases; measurement could entail charting the number of occurrences of various events over time. The measurement of these key variables should provide useful information. It is suggested here that measurements are obtained on key organizational cultural variables. First, measurement will illustrate how much of a hedge fund regulation is needed as well as identify the areas in which the present culture is lacking. Secondly, the measurement will isolate key elements for effectiveness in which the security company is deficient, thus allowing for concentration on a few specific items. Determine the Depth of Hedge fund regulation The purpose of this is to gauge the difficulty in achieving hedge fund regulations. If values, beliefs, assumptions, and orientations need changing for the organization to operate effectively in the new environment, hedge fund regulation is necessary. If these elements are extremely deep-seated, a long-term, concerted, controlled evolution will be necessary.       Implement the Hedge fund regulations There are three basic techniques of hedge fund regulation implementation: the top-down approach, the participative approach, and the subculture approach. Top-down or imposed changes usually result in hedge fund regulations that are difficult to sustain, even though they may be easy to bring about. In other words, top-down approaches may result in overt compliance, but no covert acceptance. Participative approaches to hedge fund regulations are difficult and time consuming, but the commitment and acceptance to the hedge fund regulations is superior to a changed atmosphere which improves performance. Methods of evaluation could include monitoring, measuring effectiveness, or comparison of elemental frequency with original baseline measures gained during the internal organizational analysis. An increase in the key element frequency combined with a stagnation of organizational effectiveness could mean that the key elements were not defined correctly. The hedge fund regulations, in other words, were implemented with minimal or detrimental impact on organizational effectiveness. It is clear, however, that hedge fund regulation can either facilitate or severely hinder a chosen strategy and further understanding of investor influences may be paramount to full understanding of effective strategic change.     Advantages of Hedge fund  Investments Hedge funds can be of significant value to the company owners and the private investors as well, provided that the value will be disclosed to the private investors. This may be also true for broad-based Hedge funds. Company owners are pushing for increased disclosure of the cost of the Hedge funds in general and the associated value they create for the private investors. Meanwhile, the private investors or the beneficiaries of the Hedge fund remain in the light regarding the value and be able to discuss the value of the private placements respectively (, 2001). It is true that the value can vary greatly based on the assumptions made but most hedge funds already include information about the private investor’s accrued benefit and his / her projected benefits at retirement.  Extending the calculations to include the cost or value of these Hedge fund amounts would not be difficult. A simple reconciliation to the amount from the previous year would provide an idea of the value the private investor earned in the year. Any communication of the value of the Hedge fund would need to have clear explanations of what the value represents and how the value will be sensitive to changes in assumptions and decisions that the private investor makes. But those explanations should be relatively easy to provide and it is in both the company owner’s and the private investor’s interest to better understand the value of the benefit. Disadvantages of Hedge fund Investments One of the big problems that investors face in Hedge fund is that they are normally dealt with in a very administrative way. The challenge for company owners is to get their private investors interested in Hedge fund as private investors are failing to understand the value of the company owners’ Hedge fund provision and are not making informed decisions about their future and that the company owners are frustrated too, because they feel that their private investors aren’t taking full advantage of what’s available for them. Research found that open defined Hedge fund now outnumber final Hedge funds and that many private investors don’t have a clear understanding of which Hedge fund is the most suitable for their particular circumstances. Most private investors also have unrealistic expectations about the returns they will receive on retirement (, 1999). Moreover, company owners need to close the communications gap if they want to avoid the problems and recriminations that could arise from private investors facing retirement with inadequate Hedge fund returns as the private investors have to make informed decisions and places a lot of responsibility on the company owners. Companies that are successful are the ones that target separate groups of private investors and communicate with them effectively. Companies need to do more to explain to private investors the benefits of having Hedge funds because currently only half of the private investors joins a defined Hedge fund scheme, where one is available as company owners should concentrate on to improve the way Hedge funds are communicated that includes better targeting and developing clear objectives as many private investors don’t start thinking about Hedge fund investments until it is too late most, when it comes to organizing and developing private placements. Securities Act of 1933   Hedge fund is the noticeable transactional exemption from Section 5 of the Securities Act of 1933, which mandates that companies need to submit a registration statement to the SEC before any transaction involving the selling of any security in interstate commerce happens. The Securities Act of 1933 was established to oversee the Hedge fund investments in companies and related matters, to protect private investors and to further the public interest in the preparation of informative, accurate and independent Hedge fund benefits. The Act directs private companies to establish Hedge fund standards, quality control standards and ethics standards to be used in the preparation and issuance of private placement reports as required by the Act. Under the Act, the duties of private companies involve registering Hedge fund investments; establishing auditing, quality control and other standards relating to private placement audits, investigations and disciplinary proceedings of registered Hedge fund companies and enforcing compliance with the Act (, 2005).   The foundation of the Securities Act of 1933 is freedom of contract or the standard of Hedge fund. This denotes that when monitoring and following the appropriate legal Hedge fund limits, private investors can take part in whatever contractual affairs they prefer. However, they must understand that the moment they have determined to do so, they are bind by the Securities Act of 1933. This principle has been used in the legal system for such a considerable amount of time by disputes on Hedge fund transactions specifically, the use of stipulations that are not easily recognizable for one of the contracting parties have been contended with. However, recent decision in courts have presented that the true construction of the Hedge fund contract should also be given precedence. Freedom of contract frequently been marked dead on arrival as a principle for multifarious contemporary societies. That standard has been deemed indifferent to disparities in wealth, rank, place and authority that carry out the exercise of contractual choice an illusion for the frail and deprived. Within the legal context, it has been criticized as paying no attention to the great focus of wealth that misrepresent market procedures and that tramples down the rights of those involved (, 2003). There are several elements of the principles in a Hedge fund contract as stipulated under the Securities Act of 1933. The most constricted concept is security of exchange. This denotes that at any time that there is an agreement, the party who executes earliest have to be secured in the information that it can put into effect the agreement against the other party. The most striking concept is freedom of Hedge fund contract, which comprises, other than the security of exchange, the entitlement to select one’s contracting associates and to deal with them on whatsoever conditions and circumstances one deems appropriate. Halfway between them is the principle of the sanctity of Hedge fund contract. Under this principle the parties may not have faultless autonomy to carry out whatever contract they prefer, but the moment a Hedge fund contract is completed, then one side is not free as a matter of course to change its conditions as they desire, even supposing it is geared up to recompense the other side for its losses. The sanctity of Hedge fund contract is equivalent to the absolute rights of private property in a setting unsupplied with the influence of eminent domain.  More purposely, sanctity of Hedge fund contract declines the standard of efficient breach, and accordingly it puts forth an influential clutch on traditional contract theorists and common business folks, both of whom who refuse to accept the simplistic replacement of cash for performance. Supporters in the freedom of contract are determined to both the sanctity of contract and the security of exchange. However the chain does not function the other way round (, 2005). It is likely to protect security of exchange and decline both the sanctity and freedom of contract; or to protect both the security of exchange and the sanctity of the Hedge fund contract and continue to recognize restrictions on contractual preference. The Securities Act of 1933 may possibly bound an individual right’s to select his trading associates, and still offer remedies for the contracts made in such manner. Most outstandingly, majority of the law of Hedge fund contract is not in relation to the standard of freedom of contract. The tenets of Hedge fund contract construction, explanation, discharge and implementation apply with undiminished power to the condensed system of contracts that outlast analysis in the contemporary regulatory state. The advantages from security of exchange carry on in a legal system that shells out below whole deference to freedom of contract. Undeniably, it is tough to visualize any theoretical or financial rationale to throw out security of exchange as a standard of human interaction. Freedom of Hedge fund contract has been pounced on, obviously, for the restraining and limiting suppositions on which it is claimed to respite. The system supposed that the parties addressed each other at arm’s length, in a system where neither was compelled to present any data to the other party, and where the construction of the Hedge fund contract, the conditions and the value and the theme, are completely for the parties to straighten out (, 2000). These seem sensible for the reason that people are the best arbitrators of what is in their individual interest. This bleak representation of the common law definitely encloses significant components of the reality, however it foregoes on more than a few factors of the system. First, the tenet on arm’s length dealings was by no means general, nor is supposed to have been. Insurance contracts, for instance, concerning which was stated that in all suits of insurance, whether on vessels, dwelling or lives, the underwriter is supposed to be notified of all relevant condition within the familiarity and awareness of the assured. The responsibility is relevant with special strictness for marine insurance. This means that the assured have to reveal to the insurer, ahead of the contract being wound up, all germane conditions which is known to the assured, and the assured is considered to be acquainted with every condition which, in the normal course of business, should be identified. ASX Listing Rule 7 ASX Listing Rule 7.1 limits the number of equity securities which a listed company may issue in any 12 month period without member approval (subject to certain exceptions). The maximum limit is 15% of the total number of fully paid ordinary shares on issue at the beginning of any 12 month period plus the number of fully paid ordinary shares issued with approval of members (or under one of the express exceptions to ASX Listing Rule 7.1) during the previous 12 months. ASX Listing Rule 7.4 provides that an issue of securities which is made without member approval under Listing Rule 7.1 is treated as having been made with approval for the purposes of Listing Rule 7.1 if the issue did not breach Listing Rule 7.1 and the holders of ordinary securities subsequently approve it in seeking approval of members ASX Listing Rule 7.5 requires certain information to be provided to members to enable them to consider the resolutions. B. Investor Protection and Satisfaction   Investor satisfaction in the regulation of hedge funds is a major issue in almost all securities markets. This can basically determine the success and profitability of a securities market as a satisfied investor would most likely to ‘spread the good word’ or would have be happy to do business again. It is an important theoretical and practical issue for the securities market in the US, UK and the Philippines that implements regulations on hedge funds. With positive results in most research, the significance of investor satisfaction and regulations in hedge funds in strategy development for a “market oriented’’ and “customer focused’’ securities market cannot be underestimated. Specifically,  (2005) stated that investor satisfaction and regulations in hedge funds are critical for securities markets, because of their impact on the profit. With this, there is the challenge for the securities market to deliver satisfactory quality regulations on the hedge funds. After all, investor satisfaction is inarguably one of the two core concepts that are at the root of the business model theory and practice. The other one is the quality of the regulations on the hedge fun but it can be said it is not purely intertwined with investor satisfaction as an investor can be satisfied even though the regulations on the hedge funds are not of high quality. But then, effective regulations on hedge funds among the UK, US and Philippine securities markers are considered a must for investor retention and loyalty, and undoubtedly help in realizing economic goals like profitability, market share, return on investment and other corporate target (, 1997). According to  (2002), effective regulations on hedge funds bring many benefits as satisfied investors are not very price sensitive, buy additional products, are less influenced by competitors and stay loyal longer.  (2002) stated that effective regulations on hedge funds have been deemed directly to affect investor retention and securities market share. In the securities market of the US, UK and the Philippines, the quality of the regulations on hedge funds, hedge fund features, and investor-complaint handling determine investor satisfaction. Some factors that affect satisfaction on regulations on hedge funds are extended time of operation and competitive interest rates as confirmed by the study of  (2004). In addition, there are researchers who discuss the links between satisfaction, loyalty, and profitability. They are proponents of the theory called service management, which argues that “investor satisfaction on regulations on hedge funds is the result of an investor’s perception of the value received in a transaction or relationship relative to the value expected from transactions or relationships with competing vendors. Pertaining to this theory,  (1998) stated: “Hedge funds, including relationship continuance, increased scale or scope of relationship, and recommendation (word of mouth advertising) result from investors’ beliefs that the quantity of value received from one hedge fund is greater than that available from other hedge funds”. They continued: “Hedge fund regulations, in one or more of the forms noted above, creates increased profit through enhanced revenues, reduced costs to acquire investors, lower investor-price sensitivity, and decreased costs to serve investors familiar with a firm’s service delivery system” (, 1998). With respect to the concepts of investor satisfaction in the regulations on hedge funds, this paper will aim to find out what factors contribute to investor satisfaction in the regulations on hedge funds and determine if there is an existing difference between the perception of managers and investors regarding satisfactory regulations on hedge funds. Thus, the survey method, also known as the questionnaire method, will be used in gathering the data. Surveys are the most common form of research method for collection of primary data. One of its purpose is to describe, e.g., to count the frequency of some event or to assess the distribution of some variables such as proportion of the population of different age groups, gender, educational attainment, and other information of similar nature about the population (, 2003).   C. The Roles of Banks in the Regulations of Hedge Funds             Government of countries, both developed and developing, have long realized the importance of having a central bank. A central bank has been playing crucial roles in every country’s financial system, aiming for various goals and objectives leading to the development of the country’s economy. Central banks have different specific roles and responsibilities; the Federal Reserves of the USA is a major provider of interbank settlement services and an interbank check collection system, as well as payments services, which operate retail and wholesale wire-transfer systems, the Bank of Canada is limited to providing interbank settlement services while the Bank of England is not a bank supervisor.             Despite of the differences, central banks in Hong Kong have common objectives. These are: 1. to ensure that the conduct of regulations on hedge funds is consistent with maximizing social welfare which can be achieve by promoting price stability;             2. to maximize social welfare by promoting stability of the securities market; and 3. to provide for and foster efficient and stable financial systems.        (1996) classified the various objectives of central banks as follows: 1. tactical or macroeconomic objectives relating primarily to the domestic price     level and exchange rate; 2. long-term strategic objectives of financial sector development including the development of an effective payments system and other forms of financial infrastructure; and 3. sectoral or microeconomic objectives such as prudential supervision and deposit insurance.             According to the  (, 2000), most contemporary commentators believe that central banks objectives should include macroeconomic stability, relating domestic inflation and the regulations on hedge funds; longer term considerations of financial sector development; and immediate issues of the sound management and financial health of financial institutions.             These implies that the primary role of a central bank is to set objectives for the improvement of a country’s financial system, formulate strategies and policies that will result to achieving such objectives, and coordinate with the government for implementation. These will be the challenging but significant roles of a central bank because strategies and policies depend on the current economic and financial situations and structures of a country.             The flow of resources and finance of a country, how a country produces wealth and utilizes its wealth characterizes the financial system, in which the central bank is the backbone or commonly the supervisor. Monetary policy and financial sectors function under the country’s financial system. Generally, a financial system is composed of different financial institutions: the banks or the banking system, the financial market and the central bank.    (2006) stated that the financial institutions could be categorized into three main groups: (1) the Money Market institutions consisting mainly of the central bank, commercial banks and mutual funds; (2) Non-Securities Capital Market institutions which deals with debt-related instruments such as term loans and mortgages such as the savings banks, mortgage banks, leasing companies, insurance companies and development banks; and (3) Securities Capital Market institutions that primarily trade in stocks, bonds and equity-related securities such as the Stock Exchange and investment banks.    According to  (1988), the nature and performance of the regulations on hedge funds of countries depend on the country’s development. However, regulations on hedge funds perform the same broad functions and characteristics. The primary role of regulations on hedge funds in any economy is to mobilize resources for productive investment (, 1988), particularly the money. As noted above, the regulations on hedge funds are characterized by the inflow and outflow of resources. The banking system of country plays this primary role of regulating the hedge funds by providing capital for productive investments of individuals, large companies, farmers and even foreign investors. These capitals came from the savings of individuals and companies who deposited or invested their money on banks. In other words, in a financial system, there are lenders and there are borrowers. The savers are the lenders while the investors who want to borrow money are the borrowers. Banks serve as the financial intermediaries between the lenders and the borrowers.   Banks ensure lenders that they get a better return out of their hedge funds. The hedge funds accumulated by banks from the savers serve as the resources, for investors to earn interest from the money they deposited, while providing the investors the money they need to produce more goods and services (, 1988). When more capital is available, the more businesses are created that help generate more jobs. These imply that regulations on hedge funds and banking have direct relationship with each other, making up a country’s economy.             With these views, the regulations on hedge funds play a crucial role in the country’s economy. According to  (2000), the regulations on hedge funds determine the quantity of money available in the economy. The available money or the supply of money, including coins and currency, checkable deposits, and near-money assets or those assets that can be used for transactions, determines the price level and over long periods of time, the growth of money supply will determine the inflation rate (, 2000).  (2000) added that sound regulations on hedge funds have a payments mechanism that can be used for transactions and will maintain a money asset that is trusted and accepted. Well-functioning and well-developed regulations on hedge funds encourages savings and allocates resources to high-yielding investments (, 1988), requiring good monetary policy and strategies to be able to maintain balanced and efficient flow of resources, and be able to identify and solve problems or crises especially in developing countries. Banks offer transactions assets to the public and therefore providing liquidity for transactions demand (, 2002), making the bank the most important form of lending services.  In other words, regulation on hedge funds by banks is very important for the existence of a stable financial structure resulting to economic growth. Banks are important primarily due to the following reasons:   1. According to  and  (1993) and  and  (1998), regulation on hedge funds is a necessary condition for economic growth, thus the link between a sound banking sector and economic growth is now widely acknowledged; 2. Banking crises inhibit economic growth and can possibly upset the functioning of a market economy (, 1999). Banking crises frequently result to regulations on hedge funds crises and destabilization of the international financial system. 3. Banks are important because weak banks create more hazards like deregulations on hedge funds (, 1999), possibly impacting the entire financial system, thus there should be a central bank that will back up such weak banks.     With these so much importance of banks, there should be an agency that supervises and regulates the activities of all the banks, thus central banks emerges.             CHAPTER 3: METHODOLOGY               This proposal will be done to determine if the regulations on hedge funds will be able to protect the investors and maintain the stability of the securities market. In this thesis, the interview process of collecting information will be used, as well as case studies.   Methods of Research Utilized               For this thesis, the process of description was used. In this process, it was pertinent that the goals of the thesis would be achieved immediately and with little expenses. It also implied the gathering of wild observations. Nevertheless, it became very difficult to waive the other practical and logical information where further critical data can be found. Therefore, this thesis utilized the process of description. The process of description uses various hypotheses in the investigation process.  The main objective of using this process is to illustrate the origin of an event, as it happens at a certain period during the conducting of the thesis and to exploit the reasons why a specific situation happened. The researcher chose to utilize this type of method because it was the wish of the researcher to gather primary information from the participants in order to have logical and practical evaluations and assertions for the thesis. In order to have logical results and be able to give sound assertions, this thesis used two major types of research: first-hand and second-hand.  First-hand information was gathered through conducting this thesis. Questionnaire survey and interviews were also done. Meanwhile, the second-hand information was gathered from past researches concerning regulations on hedge funds on the US, UK and Philippine securities markets.  The Research Design             The research design “onion” was utilized in this thesis because the author believed it to be the perfect research design. In the onion research design, the process of investigation and doing the thesis can be compared to removing the outer skin of an onion—in order to arrive to the core topic and the manner to gather the important information that will be critical to determining the solutions to the research queries, critical issues have to be tackled first. With the mentioned research design, the author was able to establish a framework regarding the processes that can perfectly used for this thesis.  (2003) mentioned that even though it is not typical for people to primarily take into consideration the processes of doing the thesis through choosing which research methods are appropriate, for example, using a constructed questionnaire or doing focus group discussions, ideas on this query can be connected to the core of the ‘onion’ research design. That is, in order to arrive to the core topic and the manner to gather the important information that will be critical to determining the solutions to the research queries, critical issues have to be tackled first: the primary stage poses the query of the perspectives that the thesis will incorporate, the second stage talks about the topic of processes that the thesis will undergo in connection with the perspectives of the thesis, the third stage investigates the research methods that are available for the thesis, the fourth stage pertains to the duration that the author will have to take into consideration while doing the thesis, and the last stage is the information gathering processes to be utilized. Instruments utilized A pre-constructed questionnaire, or the kind of questionnaire that is normally filled up by the participants (, 2003), had been made by the author to collect the necessary information. To even improve this thesis on global war on terror, the author made the pre-constructed questionnaire wherein the participants gave a rating to every question.             The reason for choosing the utilization of the questionnaire for the gathering o pertinent information was \because of the critical value of the data being studied and gathered.  It is essential for the participants to be very frank and sincere in their answers. The utilization of the questionnaire enabled the author to examine the perspectives and opinions of the participants.             The pre-constructed questionnaires also utilized open-ended queries to gather as many data that can be obtained regarding the thoughts of respondent regarding the positive and negative impacts of the regulations on the private placements on the securities markets of the US, UK and the Philippines as well.  Interviews undertaken took about only 30 minutes to 60 minutes. The queries that were utilized during the interview process were formulated using the research queries for this thesis as the foundation; they have been evaluated, examined thoroughly by the thesis advisers. The author also established an informal interview. In this case, the author persuaded the respondents to clear out opinions that cannot be easily understood and to give further explanations on vague thoughts. The author did not reveal his personal convictions and perspectives concerning the regulations of the hedge funds to the respondents. Data Representation and Validity             To guarantee the validity of interview outputs, a series of tests were done, or similar tests to the exact batch of respondents on two separate times were done.  This method gave emphasis to that fact that there can be no significant alterations in the variables being investigated between the two separate times.  Therefore, two examinations were also done: a pretest or the initial examination was initiated and a post-examination. The respondents were interrogated two times themselves. Aside from that, the suggested methodologies, outlined interview and pre-constructed questionnaire were done in excellent fashion.  This portion illustrated preciseness and perfection in the discussions. Description of the Information utilized in the Thesis             This thesis also used second-hand information. Second-hand information involved unprocessed information and well-known research studies, including information that can be deduced by numbers and through quality.  (2003) stated that second-hand information can be classified into three primary categories: documentary information, information gathered through interviews, and those gathered from various literatures. Documentary second-hand information pertain to those often utilized in dissertations that also utilize fist-hand information gathering processes, even though such information can also be utilized by themselves or be integrated with other second-hand information. On the other hand, information gathered through interviews are those information gathered through the use of pre-constructed questionnaires that have already been investigated for their main usage; normally, such information pertain to companies, individuals or firms and can be accessed as merged information tables or as unprocessed information stored in computer files. Statistical Treatment of the Information When the whole survey results have been gathered, the author will utilize statistics to process all the information. The statistical formula to be utilized in the survey results will be the following:   1.       Percentage – to identify the degree of the answers to the survey.             n % = ——– x 100        ;           n – number of answers             N                                 N – total number of participants   2.       Weighted Mean               f1x1 + f2x2  + f3x3 + f4x4  + f5x5 x= ———————————————  ;                         xt   where:            f – weight given to each answer                         x – number of answers                         xt – total number of answers The author will be aided by the SPSS in getting the statistical results for this research.     Ethical Considerations             In respect with following the methodologies and in the spirit of uplifting the excellence of this thesis, the author did all initiatives to guarantee that ethics of conducting the research were completely obeyed.  All information gathered from the respondents was stored in a safe place. The private details of the participants and their ratings were not discussed. The perfect analytic methods for the information were chosen through the aid of the statistical analysis, and all outputs wee discussed in the thesis.   Doing the Interview             In the process of doing the interviews, the author persuaded the respondents to clear out unclear opinions or to give more explanations on short answers. The author was very specific did not try, in any manner, to change the opinions of the respondents. In order to achieve this, the author did not reveal his personal perspectives and beliefs regarding the topic. In addition, the queries that were asked to the respondents were stated with clarity, so that the respondents can easily comprehend them, and they were stated with calmness. The author also did not ask any long queries, or those queries that were hard for the respondents to understand, due to the fact that  (2002) stated that by doing long interrogations, the chance to gather an answer for every element the author likes to investigate can be blown away. The author also did not include lots of theories, as the author’s comprehension of such ideas and concepts may be different from the respondents. In addition, during the course of the discussion, the author was pushing to build confidence and gain the respect of the respondents through avoiding being so boring and by always paying attention to the answers of the respondents. Lastly, the author guaranteed that the interrogation process was not too long and did not eat up the schedule of the participants, because this could have started improper behaviour from the participants.       Summary               As mentioned in this chapter, the author will perform several steps. In the research design, the author will gather second-hand information and will establish and pursue an interview. In this step, the survey questionnaires will be submitted for the approval of the instructors. During the information gathering process, the author will gather and analyze the information gathered from the interviews and discussions. The author will then synthesize this information and from these, results and suggestions will be established. In summary, the author will perform four major stages to finish the research. Step 1: Problem Establishment for Research   In the initial step, the author establishes the particular emphasis of the dilemma to be investigated. This includes analyzing present ideas, concepts, and implementation procedures from expert studies. This procedure aids the author in merging conceptual views and results with the author’s personal comprehension of the dilemma, and understand the element of the dilemma the author want to investigate and know more about.   Step 2: Implementation of the Questionnaire               After the analysis of previous research studies, the author identifies queries for the survey and establishes a set of queries for the interview. These are then submitted to the instructor for authentication purposes. Step 3: Information Gathering and Investigation In the third step, the author will gather and study information for the objectives of establishing essential variables particular to their environment. This information will empower the author to attain a particular comprehension of the issue. Step 4: Information Analysis and Formulation of Suggestions   In the last step, the author will summarize results from the past steps and related past studies. The emphasis of this step is to analyze this information to change current hypotheses and establish various variables, as well as formulating suggestions in accordance on fresh comprehension. During this step, investigation-based and necessary suggestions for implementation will be formulated. CHAPTER 4: RESULTS AND DISCUSSION A. Case Study UK Government Regulations The UK government believes that the more they support the regulations on Hedge fund, the more private investors may sense that there is something positive for the securities market. Despite this, private investors still inquire the UK companies for suggestions on Hedge fund and other financial\ issues. UK companies therefore prefer to speak to private investors about Hedge fund, rather than interact in non-verbal ways.   There are no movements, due to the fact that some of the private investors might be aware of a hidden agenda. If private investors are not concerned at all in being a member of the Hedge fund scheme, the organization will interrogate them for their reasons. UK companies have found that private investors do not get out of the Hedge fund scheme once they start to become members (, 2004). UK companies encourage private investors to join Hedge fund schemes by comparing not being a member to failing to get the salary. If private investors still refuse to become members, the organization will try again one by one after a considerable period of time. UK companies recognize there are different perspectives in different sectors, and it views it as essential to possess these private investors on side on pensions. If a private investor does not want to become a member of the Hedge fund scheme in what looks to be a mild manner, the organization will provide them a quote from the giver. UK companies find that having their names on the quote provides private investors some hope in the scheme. The UK government would suggest to other company owners that Hedge fund reform is essential. It looks like it is a component of the group of ideas a company owner can provide for its private investors. The organization would try to persuade SMEs to not be afraid of rules and to utilize their skills. It is important to be honest when communicating with private investors, because establishing an excellent group of advantages will persuade private investors to join and to provide their best and that, in implementing so, it is establishing an effort for the benefit of its private investors in the long run. The UK government likes to view even greater take-up levels and is aiming at the ways by which this might be attained (, 2005). US Government Regulations The US government may have such debating ways of renovating the entire Hedge fund system and this should lead to greater awareness of the benefits of planning for Hedge fund investments. This means private investors will start putting far more emphasis on private placements when they choose a company to invest with. Five-point Hedge fund communication plan Ø      Establish clear communication objective Ø      Use simple, everyday language Ø      Target and tailor communications for different groups Ø      Create realistic expectations over contributions, investment growth and likely retirement age Ø      Use interactive communication or case study examples Hedge funds in the US normally represent a significant component of a private investor’s benefits package. For example, in today’s US economic environment of low long-term interest rates, the cost of providing an additional year of service in a Hedge fund investment pays as much as the percentage of pay. Yet most private investors do not appreciate or understand the value of the Hedge fund to them. Private investors who contribute to the cost of the Hedge fund may be the exception, but even they are likely to focus on the cost to them today and underestimate the benefit they will receive in the future (, 2000).  Inertia is always difficult to overcome. The fact that most US companies have not communicated information about the value of Hedge fund in the past can lead them to falsely conclude that they should not highlight the value of the Hedge fund now. Ultimately, company owners in the US must ask themselves if they are making an investment in the Hedge fund plan, do they want private investors to understand the level of that investment. This is a valid concern. Philippine Regulations Company owners in the Philippines may not want to explain to private investors how valuable their Hedge fund benefit is, only to turn around and reduce or even eliminate it. Ironically, one of the first steps in many redesigns in the Philippines is to explain to private investors what they currently have and what is changing. Therefore, often the Hedge fund is explained to private investors just as it is changed (, 2005).  Company owners in the Philippines may be able to gain more appreciation of their Hedge fund plans while they still have it in an ideal world, private investors may understand more of the reasons why the plan is being changed.  The Philippines may have problems in their Hedge fund schemes because of the unpredictable cost of keeping the scheme open. It was feared that costs could rise above the budget percentage, which was unsustainable for a company of its size. In place of the Hedge fund scheme Philippine companies may set up a Hedge fund purchase plan as the decision could possibly take away the burden of conflicts for such a company as it was considerable. Comparison of Hedge fund Regulations In principle, the Hedge fund systems of the three countries are simple as it is paid to those currently retired are financed by contributions from current private investors and firms and a stock of assets is accumulated from contributions which is used to finance Hedge fund (, 2004). In practice of reward system, such schemes tend to be run by the state – for the very good reason that private investors would find it hard to enforce the intergenerational contract implicit in Hedge fund ways as the US, UK and Philippine schemes also redistribute income to the less well off because the level of contributions paid by private investors that bears a closer relation to lifetime income than does the Hedge fund benefits they receive. The private investors in the US, UK and the Philippines within a full entitlement to a basic Hedge fund benefit, may receive the same benefit and a full entitlement which is not dependent on the value of contributions paid over the working life but rather upon the number of years of investment (, 2004). In practice, the Hedge fund schemes of the US, UK and the Philippines are run by the private sector and while there is often redistribution implicit in these schemes as the occupational Hedge fund redistribution has more normally been from those who move jobs relatively frequently to those who stay put; Hedge funds are defined contribution schemes where Hedge funds are dependent on the value of the fund at retirement and there is no redistribution between private investors. This is because of institutional facts in the US, UK and the Philippines. Much of the discussion of the relative merits of the Hedge fund schemes is about the relative efficiency of public against private sector provision of linkage between contributions and subsequent Hedge fund payments of the private investors, as whether they are run by the public or private sectors by having payments out of funds accumulated by a person’s lifetime contributions having a fixed element and rising less than proportionately with fund value.  Evaluation of US Government Regulations Since the US can be considered a steady country- where population structure is assumed constant, as is the contribution rate into a balanced Hedge fund scheme – the effective return on contributions made within Hedge fund scheme is equal to the growth of the aggregate bill. It may seem strange to talk about a return on contributions to an unfunded scheme when contributions are paid out – the real value of the Hedge fund investment paid to a private investor relative to the value of the contributions they made while working (, 2006). These Hedge fund schemes in the US can help private investors insure against shocks that affect particular generations and because such schemes often involve inter-generational transfers, they can help compensate for missing insurance markets for those who advocate a complete move to adopt Hedge fund process within the redistributive and insurance roles to a varying extents as Hedge fund schemes could be achieved by other means from universal schemes which provide the great part of retirement resources for the majority of private investors. If switching completely to Hedge fund process is problematic because of transitional costs, and potentially undesirable because of missing markets and concerns about distribution, then where are we left with the problems facing these schemes stemming from Hedge fund? The US government can switch to funding imposes costs while sticking with generous Hedge funds which will generate big rises in contribution rates in associated labor market distortions. These will help in reducing company contribution rates for a given level of Hedge fund. Hedge funds are just one element of the compensation package and must be balanced by the US companies against the constant demands by private investors for improvements in benefits and term conditions. Evaluation of UK Government Regulations Hedge fund reform must fit in with the social, economics and fiscal objectives of the UK government and must avoid major disruption to the economy. Indeed, it must strengthen the UK economy and the government must regard any change in the Hedge fund system as a positive contribution for the well-being of the private investors and the well-being and the strength of the overall society. The total benefit package is the national income maintenance program. The four main types of national income maintenance programs in the UK are: Ø      A high flat-rate benefit system and extensive Hedge fund network Ø      An earnings-related system with a limited Hedge fund network Ø      An earnings-related social security system with almost universal Hedge fund system Evaluation of Philippine Government Regulations Contributions and benefits for Hedge fund purposes may apply to that portion of earnings above the social security ceiling. Typically, Hedge fund schemes in the Philippines conform to the retirement age fixed under social security when the social security retirement age has been lowered or made flexible, Hedge fund schemes have had to adapt. Hedge fund schemes of the Philippines and particularly national policies toward them also form a major part of their policy thinking (, 2006). The result is in effect, a national Hedge fund layer that is supplementary to social security. No company owner in the Philippines is required to establish a Hedge fund plan, though tax-incentive encouragement is given to those private investors not covered by a Hedge fund plan to establish their own Hedge fund program on an individual basis. The question arises then as to how to determine financial responsibility for Hedge fund increases in a coordinated public-private system, when Hedge fund schemes have not been equally geared to providing such increases and that there are pressures to revalue Hedge fund have led Philippine companies to limit Hedge fund programs where possible.     B. Survey Basically, the respondents of the survey will consist of investors in the UK, the US and the Philippines. The criteria for the investors are that they should at least do business with the securities market for two months up. The reason for this is to make sure that they have enough time to evaluate the regulations of hedge funds in their respective countries and if it satisfies them. The investors to be surveyed, on the other hand, should have knowledge about hedge fund regulations and investor satisfaction in the regulations of the hedge fund. They should be aware of what is usually being complained and being praised concerning the regulations of hedge funds in their respective countries. The sampling technique to be used is convenience sampling to make the process faster and easier. 5 investors from each country will be surveyed. One economist each from the UK, US and the Philippines, on the other hand, will be surveyed for basic information about their perspectives on the hedge fund regulations. Part 1. Profile of Respondents This part of the paper shall be discussing the general profile of the respondents. The first to be taken into consideration is the age of the respondents. The responses are summarized in the figure below. The exhibit shows that a major part of the respondents are rather mature (35 above), consisting of 30%. This might be reflected by the fact that the predominant positions of the respondents are in the managerial level, which requires a considerable amount of working experience. This is further asserted by the 27% who were in their early thirties and the 20% in their late twenties. Exhibit 1. Age of Respondents   The next to be taken into consideration is the gender of the respondents. Apparently, a major part of the respondents constitute the male gender. This also states that majority of the respondents adheres to more masculine perspectives. Nevertheless, a 47% of the respondents are female. On the other hand, with the seemingly patriarchal culture in organization, it could be posited that females were not that good in the position. Exhibit 2. Gender of Respondents   Exhibit 3. Educational Attainment of Respondents Exhibit 3. Likewise, the respondents were asked for their educational attainment and the report shows 53 % of them are college level. The survey indicates that most of the respondents are college level that is engage to the study. The diversity of the population is further asserted when the respondents were asked regarding their professional history. This data illustrate the maturity of the respondents particularly in terms of experience. On the other hand, the apparent youthfulness of the respondents, provided by their age and their lack of professional experience could not be considered as deterrence to their responses considering that the researcher has made sure the respondents have been connected with securities market for at least a month. Moreover, there is a noticeable distinction of the respective positions of the younger generations in their respective perceptions towards the impact of investor satisfaction on the regulations on hedge funds.             Part 2. Perception towards Investor Satisfaction on Regulations on Hedge Fund Actually, a self-administered questionnaire, or the type of questionnaire that is usually completed by respondents (, 2003), was constructed to gather the needed data. This section comprised of a set of attitude statements that intends to determine the level of agreement or disagreement using a five-point Likert scale. In the Likert technique, the degree of agreement or disagreement) is given a numerical value ranging from one to five, thus a total numerical value can be calculated from all the responses. (, 2004) The equivalent weights for the answers were: Range                                                            Interpretation             4.50 – 5.00                                                    Strongly Agree             3.50 – 4.49                                                    Agree             2.50 – 3.49                                                    Uncertain             1.50 – 2.49                                                    Disagree                      0.00 – 1.49                                                    Strongly Disagree   Exhibit 4. Perception towards Investor Satisfaction on the Regulations on Hedge Funds <div align="center"> Statements 5 4 3 2 1 Weighted Mean Interpretation 1. The hedge fund regulations are utilizing a protocol for securing the protection of the investors. 1 15 10 4 0 3.4333 Uncertain 2. The hedge fund regulations ensure that loss of assets and privacy due to breaches in the security of transactions is avoided. 8 15 1 6 0 3.8333 Agree 3. The hedge fund regulations adopt an investor-focused model. 1 12 16 1 0 3.4333 Uncertain 4. The hedge fund regulations involve handling investors’ complaints effectively. 1 7 22 0 0 3.3 Uncertain 5. The hedge fund regulations are addressing the need to cope with technological changes. 6 14 7 2 1 3.7333 Agree 6. The hedge fund regulations are addressing the issues on security and privacy of investors. 1 16 13 0 0 3.6 Agree 7. The hedge fund regulations are responding to the need to have qualified and competent resolutions for the benefit of the investors 7 20 1 2 0 4.0667 Agree 8. The hedge fund regulations are responding to the needs of the investors. 2 20 8 0 0 3.8 Agree 9. The hedge fund regulations offered by your country is excellent. 6 18 5 1 0 3.9667 Agree 10. All in all, I am satisfied to the hedge fund regulations provided by my country. 1 14 13 1 1 3.4333 Uncertain </div> The table above presented the perception of the investors towards satisfaction on the hedge fund regulations in their respective countries. Basically, the summary of results yields to Agree interpretation except to statements 1, 3, 4 and 10.  Basically, the 3.83 weighted mean in question no. 2 provides us an idea to conclude that hedge fund regulations ensure that loss of assets and privacy due to breaches in the security of transactions is avoided.  Moreover, majority of the respondents agreed that hedge fund regulations are responding to the needs of the investors since majority of them stated that the hedge fund regulations offered by their countries are excellent.             To validate the efficiency of the hedge fund regulations, the research used the t-test analysis to determine the difference of perceptions of surveyed investors regarding to its overall assessment. Then, we have, Table 1   This table displays the number of cases, mean value, standard deviation, and standard error for the test variable(s) within categories defined by the grouping variable. Since the Independent Samples T Test procedure compares the two group means, it is useful to know what the mean values are.     Table 2     Basically, the Independent-Samples T Test procedure compares means for two groups of cases. The mean values for the two groups are displayed in the Group Statistics table. Since the significance value for the  test is high (typically greater that 0.05), then we have to use the results that assume equal variances for both groups. And since there is a low significance value for the t test (typically less than 0.05), then this indicates that there is a significant difference between the two group means. Meaning to say, the perception of managers is different to the perception of investors regarding the overall status of satisfaction in the hedge fund regulations.     Interview Portion This part of the questionnaire is about the basic role and performance of hedge fund regulations, the second part is about the power of hedge fund regulations in the securities market while the third part is for the determination of the developmental role of hedge fund regulations. The third part also contains specific questions that require definite answers while the first two parts are evaluation of hedge fund regulations, in which the interviewees simply check the box that corresponds to their answers.   On the first part, it was found out that majority of the economists perceive hedge fund regulations to have fairly acceptable regulatory and supervisory role, but commented that the hedge fund regulations needs further amendments. Four of the seven economists answered “unaccepted” on the hedge fund regulations being implemented by their countries but noted in summary that some of the regulations included in the hedge fund being hurt the securities market in some ways like the high minimum capital requirements that is why they cannot open more branches in the country. We also want to lower credit interests so that the hedge funds can attract the farmers and low-income individuals and families that they think has the potential to pay debts.       The following data are obtained from the interviews conducted with the 7 economists in the US, UK and the Philippines: Performance of Hedge fund regulations Very Acceptable Acceptable Neither Acceptable nor Unacceptable Unacceptable Very Unacceptable Business Models 7 0 0 0 0 Regulatory Role 0 4 2 1 0 Supervisory Role 0 5 2 0 0 Monetary Policy 0 0 3 4 0 Economic Development 2 3 1 1 0 Market Stability 0 2 4 1 0 Interest Rate 0 3 2 2 0 Table2. Performance of Hedge fund regulations Rated by 7 Economists   On the other hand they commended the US, UK and the Philippine governments on their effort to promote hedge fund regulations and to reduce poverty. One of the economists noted that the hedge fund regulations which one of the promoters is the US is really of great importance and are badly needed by the country. They are aware other commercial banks in other country hesitate to invest in the US because of the poverty in the country and the fear of not getting a good return on investment.       Totally To a large extent To some extent A little Not at all To what extent can hedge fund regulations help in developing the securities market? 0 5 2 0 0 To what extent can hedge fund regulations have power within the securities market? 0 3 3 1 0 To what extent can the hedge fund regulations help achieve the effectiveness of the securities market? 1 4 2 0 0   Table 3. Power of Hedge fund regulations on the Securities Market Rated by 7 Economists     Very Effective Fairly Effective Not very Effective Not effective at all How effective are hedge fund regulations in facilitating the securities market? 0 3 4 0 How effective are hedge fund regulations in facilitating the development of securities market through the investors? 0 2 5 0   Table 4.Effectiveness of hedge fund regulations             In facilitating the securities market, most economists perceive the central bank to be not very effective as well as in facilitating the development of hedge fund regulations through the private sector. They added that the majority of the investors in the country lack awareness and knowledge on the importance of hedge fund regulations as well as activities that that will boost the financial stability. The local investors also lack strategies on how to improve their businesses thus they do not see the needs to form partnerships with commercial banks and the financial support it can provide. Consequently, local investors do not have much property that should serve as collateral that they can use in case they need money for the expansion of their businesses.               The questionnaire also includes specific questions concerning the developmental roles of hedge fund regulations specifically about the technical and financial resources that must be allocated by the government to the securities market and to its rehabilitation since it is the foremost important sector that needed attention from the central bank with the help of the banking sector. In summary the opinions of the 7 economists were as follows: <ul style="margin-top: 0in; margin-bottom: 0in" type="square"> <li class="MsoNormal" style="color: black; text-align: justify; line-height: 200%; text-autospace: none"> A great percentage of the financial as well as technical resources must be allocated by the governments to the hedge fund regulations because most of country’s employment depends on this sector. If the government will allocate sufficient funds for this particular sector, the needs and financial supports required for the satisfaction of the investors of the country will be lessened. </li> <li class="MsoNormal" style="color: black; text-align: justify; line-height: 200%; text-autospace: none"> Although the economists are not aware of the specific amount that should be contributed by the government and the investors for the hedge fund regulations, they are aware of the importance of financing this sector. The government is the primary authority aware of this matter. Hedge fund regulations should be given more importance to provide satisfaction to the investors. The government should also finance the securities market but should first promote effective strategies in pursuing investors especially the foreign investors.</li> </ul> CHAPTER 5: RECOMMENDATIONS It is clear that the hedge fund regulations being implemented by the US, UK and the Philippines are very effective. As shown in the study, its investors are satisfied to the hedge fund regulations provided by the securities market. The countries are meeting the current demands for hedge fund regulations.  There are various benefits that countries get from its satisfied investors because of its effective hedge fund regulations. One of which is the loyalty of the investor. This is reflected in the loyalty behavior of the investor. This only happens when an investor is satisfied or exceedingly satisfied. It is also possible that the satisfied investor will spread to others about the good hedge fund regulations. Therefore, it is likely that other investors who learn about the excellent hedge fund regulations will also avail of the hedge fund. Another is the development to the investor of a “subconscious monopoly,” meaning, he/she does not avail other hedge funds other than those provided by their countries.  Also beneficial to the securities market is the tolerance by the satisfied investors the increases in the hedge fund’s interest. The goal of the securities market is to make sure that the investors are satisfied with the hedge fund regulations and services they offer. As investors’ preferences change and competition in the market tightens, governments need to keep their investors as well as get other prospective investors. To be able to do that, governments must always monitor the changes in their investors’ preferences as well as how bad or how good their respective hedge fund regulations perform vis-à-vis their competitors. However, knowing the needs and preferences of the investors is not enough. As changes occur, governments must also initiate changes within their respective securities market. Companies not only the banking sector must be able to adapt to the changing environment so as for them to be able to effectively and efficiently address whatever their investors’ needs are. CONCLUSION Based on the results, findings and analyses of this research, the following conclusions are evaluated and formulated: The current states of the securities markets of the US, UK and the Philippines have improved since the existence of the hedge fund regulations, whose primary objective is the promotion of financial stability for the investors. One of the accomplishments of the hedge fund regulations in these countries was the establishment of protection and security for the private investors with the help of other microfinance institutions. The establishment of hedge fund regulations whose primary role is the regulation and supervision of the securities market gave investors the confidence to invest in the country. To facilitate the securities market of the UK, US and the Philippines, these governments formulates and implements hedge fund regulations as part of their business model, act as the banker to commercial banks and regulates and supervises the securities market using some international standards and codes particularly the IMF transparency standards on monetary and fiscal policy. The IMF itself assesses the level of compliance of the UK, US, and the Philippines to these standards thus they have been strict in regulating and supervising hedge funds. However, despite of its use of international standards, the hedge fund regulations of these countries are being criticized by the commercial banks because it has not been effective in maintaining inflation rate and stabilizing the hedge fund rate as well as the foreign hedge fund rate which, in the past, years, has been getting worse. It can be evaluated that the adherence to international standards by these countries is for the approval of hedge funds needed by the country in pursuing its developmental activities such as poverty alleviation and improvement of the agricultural sector of the country. The UK, US, and the Philippines have also agreed to harmonize its hedge fund regulations with the regulation of the member banks. However, it was found out that there is no direct significance between harmonization of the hedge fund regulations and financial stability. But it was also found out that harmonization of hedge fund regulations can help improve the capital circulation in the countries. However, these countries do not take advantage of this opportunity but rather take more focus on developmental activities without realizing that improvement in hedge fund regulations has direct relationship with the developmental activities that they are pursuing. When there is improved hedge fund regulations, private sectors will be encouraged to be engaged in entrepreneurship, resulting to increased small and medium enterprises in the country. With regards to the hedge fund regulations, the UK, US and the Philippines have not been very effective in facilitating their securities market. There are many aspect of their way of regulating the hedge funds such as the high capital and reserve requirements which give pressure on the investors while discouraging the investors who wanted to invest in these countries. Therefore, the policy and regulations of the hedge fund of these countries contributes to the unfriendliness of the investment climate of the country. The securities market of the UK, the US and the Philippines is not yet modernized unlike the securities market of other countries. Too much involvement of the government in hedge fund regulations activities is the main reason behind why their securities markets are still underdeveloped. These countries have no clear statement on how they can improve their hedge fund regulations that leads to the modernization of the securities markets. Improvement of their hedge fund regulations helps these countries in attracting investors. Therefore, the countries’ hedge fund regulations are not yet well-developed and well-functioning as does not very keen in promoting and encouraging savings and credit for the investors.               REFERENCES Journal Articles </div> Credit:ivythesis.typepad.com

Can regulation on hede fund able to protect the investors and maintain securities market stability?

CHAPTER 2: REVIEW OF RELATED LITERATURE The Process of Hedge Fund Regulations Hedge fund regulation is the inspection and verificatio...