Hedge Fund Ethics - The Responsibility of Running a Hedge Fund

Unless you have been living under a rock since September 2008, then have seen the great damage that can be caused by bankers and financiers when they are negligent with how they handle their money. The global economy taking a huge nosedive nearly 2 years ago has made it so that hedge funds need to change their methods to come up with more innovative ways to secure funding. Although not all of the blame for the economy can be placed at the feet of hedge funds or offshore hedge fund managers, they certainly need to abide by a set of hedge fund ethics so that this type of things doesn't happen again in the future.

When the economic downturn first started at the end of 2008, it led to some questions being about hedge fund ethics. Although a hedge fund manager's primary duty is to make money for both himself and his investors, the economy collapsing has raised the question of what constitutes right and wrong. Most prime brokerage firms and fund managers can agree upon what makes up the "wrong" category, the things that they shouldn't be doing. Where people seem to have a difference of opinion, is what falls under the ethically "right" category.

This big debate over hedge fund ethics and what is considered right and wrong, has led to a number of questions being raised. Suppose you are a hedge fund manager and your fund is way from where it should be. You realize that it will take several years for you to make up for all of those losses and get it back to a point where you can start making a healthy profit again. So you have to ask yourself, which way do you want to go in handling this? Do you stay put and keep working with your fund, dealing with the losses until you can recuperate them, while also improving the offshore investment fund of your partners? Or do you quit working with the fund and either start working with another one or create an entirely new for yourself?

The morally and ethically sound thing to do would be the first option, to stay with the fund until you can recover the losses. This also helps you to remain ethically loyal to your investors. But what if your fund is never going to recoup its losses? In this case, hedge fund ethics would say that you should close the fund and give the money back to your investors.