The ECB on Hedge Funds and derivatives

money.jpgTwo days ago I posted briefly about the apparent risky business of derivatives. Now, the European Central Bank is also at it warning about hedge funds. (FT article walled for non-subscribers)

"Hedge funds have created a "major risk" to global financial stability for which there are no obvious remedies, the European Central Bank warned on Thursday in one of the bluntest official statements yet on the rapidly growing sector.

In a clear hint of rising official nervousness about the multi-billion-dollar industry, the ECB ranked an "idiosyncratic collapse of a key hedge fund or a cluster of smaller funds" in the same category as a possible bird flu pandemic as the types of shocks that could trigger fresh disruption in financial markets."