A Guide to Starting Your Hedge Fund

Chapter 11Quo Vadis

The best thing about the future is that it comes only one day at a time.

Abraham Lincoln

1. Will there be further political and regulatory intervention in a way that is harmful to energy hedge funds and their growth?

   When considering regulatory intervention and energy hedge funds, there are three broad themes: (1) regulation of energy hedge funds; (2) regulation of commodities trading (physical and financial); and (3) regulation of other players in the market.

   From what we can tell, there do not appear to be any new political or regulatory initiatives that are specifically targeting energy hedge funds. Following the GFC, position limits that were designed to limit speculation in commodity markets were introduced as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act. Dodd–Frank was signed into law on 21 July 2010. Following the enactment of Dodd–Frank, the Commodity Futures Trading Commission (CFTC) introduced rules on position limits for futures and swaps. In response to a civil action brought by the International Swaps and Derivatives Association, the US District Court for the District of Columbia issued an order on 28 September 2012 that essentially nullified the CFTC's position limit rules and required the CFTC to reconsider new position limit policies, which have not been finalized as of yet.

   That said, regulations that impact hedge funds broadly will obviously affect energy hedge funds as well. For example, over the last few years we ...