Outlook: The hedge fund's time could be up
Friday 25 September 1998
Concern has been expressed in three ways. Regulators were worried because hedge funds are unregulated. Market pundits were concerned because hedge funds are high-risk enterprises which because of the leverage they apply in markets pose a significant risk to the health of the financial system as a whole. And finally, the politicians are drawn in because hedge funds are seen as the ultimate market speculators whose activities are often blamed for speculative booms and subsequent busts.
None of these warnings seem to have stopped some of the world's best known banking names - including our own dearly beloved Barclays - becoming involved with John Meriwether's Long Term Capital Management, either as lenders or investors - and presumably a string of other hedge funds too. As it happens, LTCM was regarded as one of the safer hedge funds, so heaven knows what's going to happen to the rest.
Every business cycle comes to an end for a different set of reasons. If bankers could anticipate them, then there would be no cycle. Even so, those caught up in LTCM and other hedge funds really only have themselves to blame for the losses now being chalked up. Anyone that comes offering 30 per cent-plus returns a year cannot be for real.
Inevitably the hedge fund debacle will prompt calls both for a regulatory crackdown and for the activities of hedge funds to be made more transparent.
But as ever, the politicians are several steps behind the market. Nobody in their right mind is going to lend to or invest in these things after what's just happened. The hedge fund's time is probably already up, with or without regulatory action.
- 2 Friends 20th anniversary: Alison Jackson photographs reunited cast
- 3 There is literally not a single woman in this iPhone 6 queue
- 4 Hitler’s former food taster reveals the horrors of the Wolf’s Lair
- 5 Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...