Reply #30: Spotlight swings onto hedge funds ahead of G8

[UpInArms]

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-06-21T143103Z_01_L20449287_RTRIDST_0_FINANCIAL-SUMMIT-EUROPE-HEDGEFUNDS.XML

LONDON, June 21 (Reuters) - Lavish rewards mean financial managers are queuing to join them, regulators fear them and some German politicians describe them as "locusts" -- few it seems are neutral about the $1 trillion hedge fund industry.

Leading figures from London's hedge fund community, the biggest in the world outside the U.S., are being quizzed by a team of Reuters journalists in a two-day summit this week to unravel what is driving the industry and its trading strategies.

Hedge funds have expanded massively since 2000. Wealthy investors, who on average lost a quarter of their personal assets globally in the dot.com crash, poured money into the funds, whose returns stayed in positive territory as stocks plummeted and losses in traditional investment funds piled up.

But the financial wizardry employed by hedge funds such as the short selling of shares in a bid to pick them up more cheaply later or the exploiting of small pricing differences within company capital structures have attracted suspicion and charges of unproductive profiteering.

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This trend has kept the money flowing into hedge funds so far in 2005, despite the industry's worst performance since 1998, some high-profile fund closures and the expected heaviest redemptions in a decade in the second quarter -- mainly from wealthy private investors.

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