The debate about the role of hedge funds regulation started some ten years ago. It is based on spectacular failures that threatened financial stability, like the near collapse of LTCM (1998) or the bankruptcy of Amaranth (2006). The credit crisis that has embroiled US and global financial markets since the summer of 2007 has created a number of casualties, most notably three of the top five US investment banks (Bear Stearns, Lehman Brothers, and Merrill Lynch). In hindsight their highly leveraged business model was particularly vulnerable to deterioration in market and funding liquidity. This subprime crisis has revealed the weaknesses and the risks of securitization, in which the hedge funds industry has been deeply involved. This latest event bolsters the debate about the risks embedded in hedge funds. Pleas for stronger regulation are getting more attention. At the same time, it is striking how few hedge funds have suffered the same fate. A widely held view following the collapse of long-term capital management (LTCM) was that hedge funds – as highly leveraged institutions – pose a systemic risk to the global financial system. This view motivated the global financial architecture to push for greater direct regulation of hedge funds—a call that has been repeated in discussions.