Martin Vander Weyer’s Any Other Business
Hedge funds can be accused of many different sins, not least because they operate in many different shapes and forms across the investment universe. As a label, ‘hedge fund’ is so loosely generic that generalising about the sector is almost as pointless as trying to corral it with tighter regulation, as EU finance ministers have been doing this week. Some hedge funds pursue, with brilliant results, the contrarian hunches of individual fund managers. Some cheat by trading on insider information or false rumours. Some are ‘long-only’, meaning that they buy and keep things that they expect to appreciate in value. Some are habitual short-sellers, seeking to profit from things they expect to depreciate. Few claim they do what they do in order to make the world a better place. But likewise few would accept that to profit by betting on the impending collapse of a company or national economy is either unethical or (if it happens to be your own economy) unpatriotic. Hedgies might accept that their trading contributes to volatility and thus to bouts of market panic, but no one seriously accuses them of creating the financial crisis: that was the work of ill-managed banks and incompetent governments. Furthermore, hedgies point out that their sector is fiercely self-regulated in a Darwinian sense: in the past two years, hundreds of weaker funds have gone bust, and not one of them asked for a government bailout.
So the new EU directive on hedge funds is misguided — it is damaging to London where most of the hedgies live, and stirred Boris Johnson to put up a robust fight against it. But George Osborne chose not to make a stand on it at his first Ecofin meeting on Tuesday.

Comments
Join the debate for just £1 a month
Be part of the conversation with other Spectator readers by getting your first three months for £3.
UNLOCK ACCESS Just £1 a monthAlready a subscriber? Log in