A Bourse Diary

Thoughts on stocks, speculation and ... life

Thursday, February 15, 2007

Hedge Funds do not bear just risks

The G7 summit put hedge funds on its agenda and caused additional uncertainty about the health and stability of the financial system. Especially the Yen carry trades, the vast volume of the managed assets as well as the often involved leveraged trading positions were a main source of concern and were widely covered by the mass media.

Though, looking in some details one could suggest, that the G7 politicians do not understand the role of the hedge funds to the full. For example Fed chief Bernanke made more cautious statements on the need of regulations and pointed some important "positives" of the hedge funds activity:

"I would be very reluctant to get involved in heavy-handed, direct regulation of hedge funds," Bernanke told the Senate Banking Committee in response to a question during semi-annual testimony on monetary policy.

"One of their key characteristics is that they are very nimble ... and that is good for the economy, because they help to create liquidity in markets, they help to spread risks around more broadly, and a regulatory regime that inhibited that flexibility and nimbleness would eliminate a lot of the economic benefits," he said.

Reuters.com, Fed's Bernanke - don't over-regulate hedge funds


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