Hedge funds have started to play an important role in financial markets during the last decade.
They have affected important aspects of financial intermediation such as asset allocation
decisions and corporate governance. Julian Holler provides an excellent theoretical and
empirical analysis of these issues. His analysis offers strong support that hedge funds enable
investors to improve asset allocation decisions. Consequently hedge funds are an interesting
alternative asset class for institutional investors. In contrast to results for the U.S.
capital market his research provides evidence that hedge fund activism does not persistently
increase the value of firms in Germany. This result suggests that the institutional environment
has a strong influence on the effectiveness of corporate governance mechanisms.
