Hedge funds and regulatory gaps in the United States: challenges for financial stability

Abstract

The expansion of hedge funds over recent decades has intensified debates about the limits of financial regulation in the United States, particularly with regard to the identification and monitoring of systemic risk. While hedge funds play a relevant role in market dynamics through liquidity provision and arbitrage strategies, their operation largely outside the traditional regulatory perimeter has exposed important weaknesses in the financial supervisory framework. This article examines the main regulatory gaps associated with the oversight of hedge funds in the United States, focusing on the post-2008 financial crisis period and the implementation of the Dodd-Frank Act. The study adopts a qualitative approach, drawing on academic literature, institutional documents, and illustrative cases widely discussed in recent regulatory debates. The analysis shows that, despite significant regulatory advances following the crisis, substantial challenges remain due to institutional fragmentation, dispersed supervisory mandates, and legal exemptions that limit transparency and effective oversight. These gaps contribute to the displacement of systemic risk beyond the traditional banking system, constraining the preventive capacity of regulatory authorities. The article argues that strengthening financial stability requires improved coordination among supervisory agencies and enhanced reporting and monitoring mechanisms applicable to hedge funds, in order to reduce vulnerabilities and mitigate systemic risks within the U.S. financial system.