World’s Unions Debate: Are Hedge Funds “Locusts” or “Termites”?

Jun 24th, 2007 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation | By:
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In a follow-up from Friday’s posting about the potential global financial calamity that might be caused by the seemingly benign pension fund community, we stumbled across this report (also released last week) by the Brussels-based International Trade Union Confederation (ITUC).  The report is called “Where the House Always Wins: Private Equity, Hedge Funds and The New Casino Capitalism“.

Look, we’re obviously biased toward private equity and hedge funds.  But we’re also sensitive to their impact on other stakeholders.  Private equity, by its very nature, will always be a tug-of-war over economic output between the owners of capital and other stakeholders (employees, suppliers, neighbours, NGOs etc.)  Given the massive and sudden growth in private equity and hedge funds, there is no doubt these issues will need to be addressed sooner rather than later.  In fact, we know of various multi-lateral initiatives tackling these problems right now and we are following them closely.

However, while attempting to make an important contribution to the global debate, this report makes excessive use of fallacies and half-truths that reveal a populist anger over the bigger issues of economic inequality.  The resulting potpourri of socio-economic beefs does little to advance a rationale dialogue.

Before cracking the cover, we took a wild guess that these guys weren’t crazy about alternative investments.  And since most of you may not be crazy about unions (or reading the report’s 52 pages), we distilled a few of the more outrageous claims below.

To begin with, this excerpt sums of up ITUC’s overall feelings about hedge funds and private equity:

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