Monday, September 26, 2005

Hedging things 

Interesting piece on Hedge Funds in Guardian Weekend .. especially as one of the few Hedge Fund managers willing to talk to the press is Paul Marshall, who once worked as a researcher for Charles Kennedy and identifies himself as a LibDem supporter. His personal income last year was £13 million… some of which goes to finance the Centre For Reform which he describes as ‘the only Liberal thinktank’.

One issue is around Marshall also heading the charity ‘Ark’, which supports City Academies. When I last looked academies were still against party policy so some reassurance that his monies have not done an Ecclestone.

Another issue is the very existance of hedge funds on the present scale, which do need some serious discussion. Myself, I would start by reading John Kenneth Galbraith’s book ‘The Great Crash’ and also his later writings on leveraged funds which stress two themes:
1 Financial Genius comes before the Fall – people associated with huge amounts of money get a false glamour which leads others to disaster.
2 It can happen again – the only question is how long it takes for people to forget about the conditions of the last disaster.

Also highly entertaining is Gabraith’s “Money whence it came, where it went” which removes the spurious glamour of cash.

For a professional but very readable look at the history of risk , enjoy Peter Bernstein’s book ‘Against the Gods – the remarkable story of Risk’ which shows the history of attempts to understand and control uncertainties. It also stresses the need for some risk-taking behaviour.

Hedge funds are not necessarily bad things but like everything else they have the weaknesses of their strengths as well as the strengths of their weaknesses. On this I have some systemic thought of which more later.

Meanwhile I will; take an interest on Paul Marshall’s contributions to Liberal Democrat debates.

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