Cover -- Title Page -- Copyright -- Preface -- Contents -- Figures -- Tables -- Summary -- Acknowledgments -- Abbreviations -- CHAPTER ONE: Introduction -- Potential Contribution of Hedge Funds to Systemic Risk -- Research Methods -- Organization of This Report -- CHAPTER TWO: Background on the Hedge Fund Industry -- Overview of the Hedge Fund Industry -- Legal Structure and Role in the Financial System -- Number of Hedge Funds and Assets Under Management -- Restrictions on Investor Withdrawals from Hedge Funds -- Characteristics of Hedge Fund Investors -- Distribution of Funds in the Industry, by Size and Characteristics of Hedge Fund Advisers -- Hedge Fund Returns and Investment Strategies -- Attributes of Hedge Funds That Amplify and Mitigate Their Potential Contribution to Systemic Risk -- CHAPTER THREE: The Collapse of Long-Term Capital Management -- Factors Leading to the Collapse of Long-Term Capital Management -- The Rescue of Long-Term Capital Management -- The Aftermath of the Collapse of Long-Term Capital Management -- Lessons from the Collapse of Long-Term Capital Management -- CHAPTER FOUR: Hedge Funds and the Financial Crisis of 2007-2008 -- Factors Underlying the Financial Crisis -- Hedge Fund Contribution to the Financial Crisis Through the Credit Channel -- Impact of Hedge Fund Losses on Creditors -- The Failure of the Bear Stearns Hedge Funds -- Hedge Fund Contribution to the Financial Crisis Through the Market Channel -- Hedge Fund Contribution to the Buildup of the Housing Bubble -- Hedge Fund Deleveraging -- Short Selling -- Hedge Fund Runs on Investment Banks -- Assessment of Hedge Fund Contributions to the Financial Crisis -- CHAPTER FIVE: Potential Hedge Fund Threats to Financial Stability and Reforms to Address Them -- Potential Hedge Fund Threats to Financial Stability -- Lack of Information on Hedge Funds.

Lack of Appropriate Margin in Derivatives Trades -- Runs on Prime Brokers -- Short Selling -- Compromised Risk-Management Incentives -- Lack of Portfolio Liquidity and Excessive Leverage -- Financial Reforms That Address Hedge Fund Contributions to Systemic Risk -- Reforms That Address Lack of Information on Hedge Funds -- Reforms That Address Lack of Appropriate Margin in Derivatives Trades -- Reforms That Address Hedge Fund Runs on Prime Brokers -- Reforms That Address Short Selling -- Reforms That Address Risk-Management Incentives -- Reforms That Address the Liquidity and Leverage of Hedge Fund Portfolios -- Summary -- CHAPTER SIX: Conclusion -- APPENDIX: Regulatory Reforms That Address Potential Systemic Risks Posed by Hedge Funds -- References.