2015 • Volume 40 • Number 1

Super Hedge Fund

Sharon Hannes

Activist hedge funds revolutionized corporate America, generating both excitement and criticism alike. This article suggests that a novel market mechanism, a “super hedge fund,” would maintain the benefits of hedge fund activism, while curbing its downsides. The super hedge fund would not really be a fund but, rather, a contractual arrangement among a broad group of institutional investors and a task force of financial experts. The task force would pool together the potency of the institutional shareholders in a sophisticated manner and then unleash its sting on target corporations. Unlike current hedge fund activism, the super hedge fund would not necessitate substantial financing or market transactions and, therefore, would be extremely efficient and very accessible. Importantly, the mechanisms of the super hedge fund would operate so as to ensure that the fund’s incentives are closely aligned with the interests of the long-term shareholders of the targeted corporations. Hence, the new mechanism should respond to the claims of short- termism lodged at current hedge fund activism.