HEDGE FUNDS ARE creating a "major risk" to global financial stability, although there may be little that can be done to tackle the problem, the European Central Bank suggested yesterday.
According to this morning's Times, the ECB sounded a note of alarm over the possible repercussions from any collapse of a hedge fund, or group of funds, in one of the starkest warnings yet from an official institution over the role of the burgeoning but secretive industry. In its twice-yearly Financial Stability Review, the Frankfurt-based central bank also raised serious concerns over many hedge funds’ growing use of “increasingly similar” trading strategies. It argued this trend could lead to worldwide liquidity problems if a financial or economic shock led funds simultaneously to att...
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