FS sees need to oversee risks posed by hedge funds (with
photos)
********************************************************* The Financial Secretary, Mr Henry Tang, suggested today (September 8) that member economies of the Asia-Pacific Economic Cooperation (APEC) should review their oversight policies over hedge fund activities.
At the Policy Dialogue on Free and Stable Movement of Capital of the 12th APEC Finance Ministers' Meeting currently being held on Jeju Island, Korea, Mr Tang said: "While we recognise the contribution to market liquidity and risk diversification by hedge funds, concerns remain that hedge funds, as a group with significant and concentrated exposures, have accelerated market volatility especially in markets of thin liquidity."
Mr Tang pointed out that while some big hedge funds that had generated big waves in financial markets have become extinct, the hedge fund industry had expanded phenomenally through a proliferation of smaller hedge funds. And many hedge funds were not based in the Asian region.
"With the increasing popularity of hedge funds to retail investors, we should consider the regulation of hedge funds from the angle of investor protection," Mr Tang added. He also told other fellow finance ministers that for hedge funds offered to the public, the securities regulator in Hong Kong had issued guidelines requiring registration and reporting requirements, as well as imposing minimum criteria for assessing hedge fund managers.
Soon after the Asian turmoil in 1998, APEC economic leaders in their Declaration drew attention to the concerns posed to the financial markets by highly leveraged institutions and called for increased transparency and disclosure standards. Since then, substantial work has been done on reducing banks' overexposure to hedge funds through better counterparty risk management, but direct regulation of hedge funds was ruled out.
"It is time we revive the discussion on whether some form of oversight is necessary", said Mr Tang.
photos)
********************************************************* The Financial Secretary, Mr Henry Tang, suggested today (September 8) that member economies of the Asia-Pacific Economic Cooperation (APEC) should review their oversight policies over hedge fund activities.
At the Policy Dialogue on Free and Stable Movement of Capital of the 12th APEC Finance Ministers' Meeting currently being held on Jeju Island, Korea, Mr Tang said: "While we recognise the contribution to market liquidity and risk diversification by hedge funds, concerns remain that hedge funds, as a group with significant and concentrated exposures, have accelerated market volatility especially in markets of thin liquidity."
Mr Tang pointed out that while some big hedge funds that had generated big waves in financial markets have become extinct, the hedge fund industry had expanded phenomenally through a proliferation of smaller hedge funds. And many hedge funds were not based in the Asian region.
"With the increasing popularity of hedge funds to retail investors, we should consider the regulation of hedge funds from the angle of investor protection," Mr Tang added. He also told other fellow finance ministers that for hedge funds offered to the public, the securities regulator in Hong Kong had issued guidelines requiring registration and reporting requirements, as well as imposing minimum criteria for assessing hedge fund managers.
Soon after the Asian turmoil in 1998, APEC economic leaders in their Declaration drew attention to the concerns posed to the financial markets by highly leveraged institutions and called for increased transparency and disclosure standards. Since then, substantial work has been done on reducing banks' overexposure to hedge funds through better counterparty risk management, but direct regulation of hedge funds was ruled out.
"It is time we revive the discussion on whether some form of oversight is necessary", said Mr Tang.
Ends/Thursday, September 8, 2005
Issued at HKT 14:24
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