City of London

I shall briefly quote Will Hutton. This is from The Guardian rather than the Financial Times—there is another view of the world. He said:""Hedge funds in particular cannot be allowed to peddle the fiction that they had no role in the financial crisis. For the record, in July 2007 London and New York hedge funds had assets under ""management of some $2 trillion, of which up to $1.75 trillion (we will never know the exact figures) was financed by borrowing. It was the collapse of two Bear Stearns hedge funds and three BNP Paribas hedge funds in July and August of 2007 that triggered the paralysis of the interbank markets in New York and London."" There are different views on the matter, but whatever the responsibility the alternative investment market had in the past for causing crises, we also have to look to the future, and future-proof ourselves. Such organisations are now big players and they should be regulated. An awful lot of lobbying money is being used to persuade the European Parliament to throw out the proposals, but I hope that my colleagues there will resist that and that they will consider the regulations carefully and that they will properly regulate hedge funds and private equity. Even today, the Financial Times says that according to an American study one in five hedge fund managers have been found to be misrepresenting facts. For consumer protection, there must be a case for backing those proposals. Slightly controversially, I shall refer to Mr. Rasmussen, the former Danish Prime Minister, who is the nemesis of those hedge funds and private equity firms that are resisting such regulation. He has campaigned for years for such regulation, and came to the City of London earlier in the summer. He said that, at the moment, hedge fund managers appear to be guaranteed 2 per cent. of their investments in annual fees and 20 per cent. in profits. He asked whether, if they had 0.5 per cent. in fees and perhaps 10 per cent. in profits, they would starve? Such questions are relevant and should not be dismissed. Hedge funds are part of our economy, but they should reflect upon the social usefulness of all their activities. I end by referring again to my economics teacher, Mr. John Kay, who said this summer that our financial sector should be the servant of our wider economy and not the master.