Manuel calls for hedge fund scrutiny

PRETORIA – Unregulated hedge funds and a shift towards private equity pose a risk to global financial stability and demand greater scrutiny, the new chairman of the G20 group of economies said on Tuesday.

South African Finance Minister Trevor Manuel, speaking on his return from the G20’s annual summit, also said the World Bank and the IMF must make themselves more relevant, adding their existing facilities offered limited benefits for middle-income countries like his. Manuel told reporters the G20 planned to put forward a common policy on hedge funds.”There are trends we are concerned about, in particular the quantity of money handled by unregulated hedge funds and the push we’ve seen towards private equity funds,” he said.”There is a push to take companies out of public scrutiny, a push to be unregulated.In the context of financial stability these concerns merit attention and informed comment.”Policymakers worldwide have called for more regulation of hedge funds, which invest in a wide range of financial assets and have attracted increasing institutional investments.US-based Amaranth Advisors lost US$6,4 billion in September after wrong way energy bets.”There is a lot of secrecy about what they do,” said Manuel.”Even the institutions and individuals who invest in them do not know what they’ve done, when they’ve done it and how …When people manage such large sums of money without regulation, it could induce a financial crisis.”He also urged the IMF and World Bank to undertake “a whole package of reforms,” saying middle-income countries did not borrow much from the World Bank.South Africa’s central bank governor Tito Mboweni recently said he and Manuel had asked the IMF to stop making policy suggestions that sounded prescriptive.Manuel said on Tuesday countries like South Africa needed products that took into consideration good economic governance.”Tomorrow if something happened in South Africa we don’t want to go the stand-by facility route, we don’t want all of those conditionalities, we need to hold up the position that we have managed the economy of this country well,” said Manuel.Nampa-ReutersManuel told reporters the G20 planned to put forward a common policy on hedge funds.”There are trends we are concerned about, in particular the quantity of money handled by unregulated hedge funds and the push we’ve seen towards private equity funds,” he said.”There is a push to take companies out of public scrutiny, a push to be unregulated.In the context of financial stability these concerns merit attention and informed comment.”Policymakers worldwide have called for more regulation of hedge funds, which invest in a wide range of financial assets and have attracted increasing institutional investments.US-based Amaranth Advisors lost US$6,4 billion in September after wrong way energy bets.”There is a lot of secrecy about what they do,” said Manuel.”Even the institutions and individuals who invest in them do not know what they’ve done, when they’ve done it and how …When people manage such large sums of money without regulation, it could induce a financial crisis.”He also urged the IMF and World Bank to undertake “a whole package of reforms,” saying middle-income countries did not borrow much from the World Bank.South Africa’s central bank governor Tito Mboweni recently said he and Manuel had asked the IMF to stop making policy suggestions that sounded prescriptive.Manuel said on Tuesday countries like South Africa needed products that took into consideration good economic governance.”Tomorrow if something happened in South Africa we don’t want to go the stand-by facility route, we don’t want all of those conditionalities, we need to hold up the position that we have managed the economy of this country well,” said Manuel.Nampa-Reuters