A Practical Guide to the Implications of Derivatives Reforms for Hedge Fund Managers 

Under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a new world of cleared derivatives products is being developed, and hedge funds that employ derivatives will be required to use such cleared products.  To paraphrase the law, what is available for clearing must be cleared (subject to few exemptions that generally do not apply to funds).  This new world has created significant consternation for the hedge fund industry, which must engage new service providers, enter into new trading agreements and enter into new collateral arrangements.  These and other changes will create additional risks for hedge fund managers; likely increase the cost of doing business; and increase the complexity of trading relationships.  However, hedge fund managers that proactively address these concerns and challenges can mitigate some of the impact from these new regulations.  In a guest article, Matthew A. Magidson, Chair of Lowenstein Sandler’s Derivatives Practice Group and a Partner in the firm’s Investment Management Group, provides a roadmap for hedge fund managers on how to identify and address relevant challenges.

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