G7 Offers Vigilance, But No Regulation

Feb 12 2007 | 10:45am ET

G7 finance ministers promised “vigilance” in monitoring and dealing with risks to the global economy posed by hedge funds, but not much else in terms of regulating them.

At the close of a two-day meeting in Essen, Germany, the ministers acknowledged that hedge funds and derivatives “have contributed significantly to the efficiency of the financial system” and that the growth of hedge funds has made risk assessment “more complex and challenging.” But U.S. Treasury Secretary Henry Paulson left the meetings Saturday with his skepticism of the need for more stringent regulation intact.

Paulson, the former CEO of Goldman Sachs, told reporters after the conference that a thriving hedge fund industry “is in the U.S. interest,” adding, “Market discipline, focusing on risk management of regulated counterparties, is the most effective way to address potential systemic risk concerns.”

But his fellow reguskeptic, British Chancellor of the Exchequer Gordon Brown, sounds more open to the prospect than in the past. A government source told Reuters that the U.K. is encouraged by Germany’s softer line at the conference—dropping the pejorative “locusts” and watering down its regulatory dreams to push a voluntary code of conduct.

The source said that the Treasury is “never complacent about risk” and is “happy to cooperate with international efforts aimed at improving our understanding of risk, but will resist any blanket approach.” The source also said that the U.K. would back a study of risks posed by hedge funds likely to be conducted by the Financial Stability Forum.

Paulson also pointed to the need for more information as he left Essen, noting that a U.S. working group will issue its own report on regulation “in the relatively near future.”


In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...

 

From the current issue of