The spat involving insurers squeezed between regulated solvency levels, falling investment returns a...
The spat involving insurers squeezed between regulated solvency levels, falling investment returns and hedge fund operators who are raking in the profits, grew worse this week as Man Group announced a second quarter record for new investments in its funds under management and Aviva, Legal & General and Friends Provident called for an investigation into unregulated hedge funds.
Aviva and the others accuse hedge fund managers of making profits by driving down share prices through short selling, and say lower share prices are damaging their own solvency levels, forcing them to dump shares and move into fixed-interest investments.
Man Group, the largest hedge fund manager, has added $1bn in new business during the second quarter alone, according to new figures released today, as investors continue to pull their money out of more conservative collective investment schemes and chase hedge fund profits.
To outsiders the complaints made by Aviva et. al. look like a case of sour grapes: why should they complain just because managers which use exotic gearing methods are able to turn a profit in these tough times?
But Aviva today refused to comment further on its claims that short-selling was forcing it to dump shares, and would not be drawn in to answering questions about the foundations of its own complaints.
With non-hedge fund managers soon to enter a third year of falling equity returns, the pressure is on to start making some returns or risk an even bigger outflow of capital into the investment schemes that are making money.
And this is certainly not the first time that investors or company executives in general have complained about short selling distorting the market price for company shares.
But in blaming negative fallout from in-house investment decisions made in the past on actions being taken by hedge-funds today, Aviva and the other companies involved are boxing themselves in.
Hedge funds may use esoteric investment tools, but there is no confirmed evidence as yet to suggest that the entire hedge fund community is engaged in breaking FSA regulations.
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