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Bundesbank hails hedge funds as 'blessing' for financial markets

Date: Sunday, April 8, 2007
Author: Agence France Presse

Frankfurt - Hedge funds, highly speculative investment funds that are currently under fire for their aggressive investment practices, are a "blessing" and a stabilising factor on the world's financial markets, Bundesbank board member Edgar Meister said in a newspaper interview Monday.

"One must recognise their positive effects," Meister told the daily Sueddeutsche Zeitung.

The funds took over risks that no-one else was willing to, evaluated those risks and set prices that would otherwise not be set, said Meister, responsible for banking and supervision on the Bundesbank board.

They also ensured a smooth flow of funds between short- and long-term investment instruments, the central bank official said.

In a globalised world, all financial market players had to bear their responsibility, Meister continued, pointing to banks, investors, hedge funds and the supervisory authorities.

"My view is that hedge funds should be subjected to (a system) of self-obligation and self-commitment," the central banker said.

Germany has long campaigned for increased transparency and even regulation of the largely uncontrolled hedge fund sector and has placed the issue at the top of the agenda during its year-long presidency of the G8 (Group of Eight) this year.