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Fear Of Hedge Funds Strikes Canadian Senators

Date: Thursday, November 2, 2006
Author: Dailyii.com

Whatever Canadian senators heard at marathon meetings about hedge funds in New York last month, it sure has gotten them to jump into action. That two-day fact-finding trip has led to three days of hearings in Ottawa that focus on the hedge fund industry north of the border. But from the comments of the Canadians, one can only wonder what they heard from reps of the Federal Reserve Bank of New York, the New York Stock Exchange and the local district attorney's office to gush forth with sky-is-falling emotion. We found these things were growing like weeds everywhere and they are running wild, Sen. David Angus, who is deputy chairman of the Canadian committee, said in a Financial Post interview. They told us we were well-advised to look at them in Canada. Adds Sen. Mac Herb, This is the only industry not regulated and nobody really knows what goes on. He said, It's a huge problem in Europe and the United States and we want to find out if we have similar problems in Canada. It would be hard to categorize the attention hedge funds getting as indication of a huge problem. Besides, the HF industry in Canada is a fraction of the size of that in the U.S. and they do not pose a financial stability systemic problem at this time, as they boost the economy, according to Bank of Canada Governor David Dodge. What's more, HF investors for the most part have been making money over the years, nor have there been any meltdowns a la Amaranth Advisors to dampen their investing spirits. No matter. You can bet that they [the Senate committee] will make recommendations to try to tighten up the industry, says Prof. Richard Powers of University of Toronto. Hedge funds, however, shouldn't expect a tsunami of rule changes right away. These things tend to move at glacial speed, Powers told the Post. I wouldn't expect to see anything soon, though the committee says it may make some recommendations by early next year. Meanwhile, the Canadian Securities Administrators announced at the meeting that will propose early next year that all hedge fund administrators, often called managers, to register, in addition to the existing registration requirement for portfolio managers of hedge funds.