MFA decries call for hedge fund ban

The $1.9 trillion hedge fund industry has gone on the defensive following a recent statement by Italian finance minister Giulio Tremonti, who suggested a move to abolish the alternative-class investments in Italy. “Hedge funds are private pools of capital that play a vital role in the global economy,” said Richard Baker, president and chief executive of the Managed Funds Association in Washington. “This is a time of unprecedented instability in the markets; not a time to think about abolishing an industry that is an essential source of liquidity,” he added. “In the midst of this global financial crisis, the hedge fund industry is fully engaged with regulators and policy makers to provide solutions that will benefit the markets and help to stabilize the global economy.” The MFA responded yesterday along with the London-based Alternative Investment Management Association Ltd. to comments made by Mr. Tremonti in Washington on Saturday. Speaking at the Italian embassy, he characterized hedge funds as “absolutely crazy bodies that have nothing to do with capitalism,” according to published reports. While acknowledging he would consider abolishing hedge funds, Mr. Tremonti described them as “demented, dark and opaque.” Mr. Baker believes that Mr. Tremonti is not entirely familiar with the way the hedge fund industry works in the context of the global economy. “It is too easy to point a finger at an industry that is misunderstood,” Mr. Baker said. “Hedge funds are not an appropriate scapegoat during a crisis that was caused by failures in the regulated banking system.”