Hedge Funds: Thought For the Day

"Considerable controversy has surrounded the rapid growth of hedge funds in recent years. Some commentators, assuming that hedge funds will maintain their current prominence, are calling for increased regulation of these private investment partnerships. This assumption is questionable. The hedge-fund boom was propelled by a set of temporary circumstances -- namely, the deflation of the stock market bubble and the ensuing period of very low interest rates. Under more normal market conditions, hedge-fund managers will struggle to justify their excessive fees and disappointed investors will start to withdraw funds. Further regulation is unnecessary: The hedge-fund boom is coming to an end and market forces will force the industry to contract. "

— Edward Chancellor in The Wall Street Journal, August 24, 2005