Should hedge funds be regulated?

[eagle488]

Quote from rufus_4000:

As in the case with Amaranth, it did not commit any crime in their trading activities, their losses come from bad mgmt and risk oversight, it seemed.

Thats the biggest problem. Since Hedge funds are largely unregulated, Amaranth committed no crime.

My belief is that there should be some regulation in regards to risk management and the use of leverage.

Now before someone calls me a moron, I wish to point out one of the reasons for the crash of 1929. Risk management and the overuse of leverage. . .

 

[SteveD]

BAD risk management and the ABUSE of leverage....

Great Depression??.......Son, this is the 21st Century


Good God, when is it a "crime" to be a failure......

Eastern Airlines, TWA, Woolco, etc etc....

SteveD

 

[2cents]

what u want to do is limit market impact of a hedgie blowing up - the rest is for qualified investors to worry about...

all u need to do is oblige all UK / US FCM, primes etc regulated institutions to submit daily open interest + transaction volume info on any & all traded instruments to a central body, empowered to enforce tougher margin / haircut rules without notice shld mkt / liquidity risk hit certain levels...

any idea what amaranth's mkt & liquidity risk picture may have looked like in the weeks prior to the collapse? not pretty at all i'd say...

 

[OddTrader]

Yes, hedge funds should be regulated.

My view for now is Structured Products with say 90% capital guaranteed should be the proper way to go.

Therefore all hedge funds in the future should be reformed as Structured Products underwritten by some interbationally accredited first tier insurers/ bankers.

Comments?

 

[man]

Quote from Cutten:

Yes, they should be regulated by the people who put money into them.

dare to contradict. too much money is chasing into
the funds. they can select easy investors. but the
damage they might do can harm all investors, not
just those in their fund. so, though i sense where
you are coming from and basically agree, it is not
enough i am afraid. just my thoughts on this.

i always ask myself how many funds have to blow
up before people realise that single positions managed
by whoever will run into a swan inevitably. but that
is the game: they don't care as long as they make
enough before ...

 

[eagle488]

"BAD risk management and the ABUSE of leverage....

Great Depression??.......Son, this is the 21st Century"


Yes, Dad, the abuse of leverage and bad risk management still put our economy in great risk. Huge fluctations and market crashes can still be caused by such things even today.

Unfortunately, Americans usually only learn after the fact. Hedge fund regulation will only take place when billions of dollars are lost due to blow-ups and economic panics.

So Dad? Are you going to learn about the Japanese after they attack Pearl Harbor? Are you going to learn about the Al Queada after they have blown the towers apart? Are you going to learn that using leverage is bad when you finally lose more money then the budget of NASA?

Your old ways of reacting to things after the fact only prove that your methods are outmoded and pose a clear danger to us all.

 

[Cutten]

Quote from man:

dare to contradict. too much money is chasing into
the funds. they can select easy investors. but the
damage they might do can harm all investors, not
just those in their fund. so, though i sense where
you are coming from and basically agree, it is not
enough i am afraid. just my thoughts on this.

i always ask myself how many funds have to blow
up before people realise that single positions managed
by whoever will run into a swan inevitably. but that
is the game: they don't care as long as they make
enough before ...

Short-term price fluctuations can never harm investors, only speculators. In fact, a market crash should be welcomed by all investors, as it provides bargain prices for a period of time.

Also, your point ignores the widely documented and well-known adverse effects of government intervention and regulation.

 

[eagle488]

"Short-term price fluctuations can never harm investors, only speculators. In fact, a market crash should be welcomed by all investors, as it provides bargain prices for a period of time."

I would love a market crash, that is, if I was in all cash at the time.

 

[man]

Quote from Cutten:

Short-term price fluctuations can never harm investors, only speculators. In fact, a market crash should be welcomed by all investors, as it provides bargain prices for a period of time.

Also, your point ignores the widely documented and well-known adverse effects of government intervention and regulation.

you are a serious person, so i'd rather not get into a debate
with you, but a stock market crash within a day is a short term
fluctuation and most "investors" would probably see this is ...
well, less an opportunity than, maybe ... catastrophy? i mean
someone (=they) are those who lost the money created by the
fluctuation in the first place ... . admittedly a drastic example.

while overdone regulation is one thing, SOME regulation is
another. letting a several billion dollar fund having significant
market share in natural gas ... well i would call that too little
"regulation". and the term "the widely documented and well-
known adverse effects of government intervention and regulation"
is a little to general for me here. i mean the free market is
obviously (widely known?) flawed. just consider our environment.
the free marekt is definitely unable to manage a couple of things.

and what we call free market is a joke in the first place, since
most markets are only called "free" as long as big corps profit
from that name giving.

having said that, i run a fund on my own. so i am not talking
my book here.

 

[man]

having said all that, most regulation discussed would probably
be just plain stupid. i am always referring to intelligent regulation,
for whatever that might mean exactly ...