Hands off Hedge Funds
Dec 21st, 2006 | Filed under: Hedge Fund Industry Trends, Hedge Fund RegulationBy: Sebastian Mallaby, Foreign Affairs
Published: January/February 2007
In this comprehensive defense of the hedge fund industry, Washington Post columnist Sebastian Mallaby echoes a theme that has weaved its way through stories several times on this blog: the parallels between technological innovation and financial innovation, between e-business start-ups and hedge fund start-ups, and between economic efficiencies resulting from process disintermediation and financial efficiencies resulting from the disintermediation of securities (such as mutual funds).
Writes Mallaby:
“Imagine two successful companies. Both are staffed by very smart people; both are innovative; both have an impact far beyond their industry, improving the productivity of the capitalist system as a whole. But the first, based near San Francisco, is the subject of adoring newspaper profiles, whereas the second, based in the New York area, is usually vilified.
“Actually, you do not have to imagine any of this, because it describes a double standard that already exists. The first company in the story is a technology firm; the second is a hedge fund. As any newspaper reader knows, technology firms are the leading edge of the U.S. knowledge economy; they made possible the productivity revolution of the past decade. But the same could just as well be said of hedge funds, which allocate the world’s capital to the companies, industries, and countries that can use it most productively.”
To continue reading this article please login (at the right) or click here to learn more about accessing our archives.
Great article and points made above. I couldn’t agree more. I think part of the disconnect is the lack of education the general public has about hedge funds. They have been defined in very constrained and slanted ways and it is hard to find sources of clear information about how they operate and why they use the strategies they employ.
I wrote a similar article to the one above on why hedge fund taxes should not be changed here: http://richard-wilson.blogspot.com/2008/01/hedge-fund-taxation.html