RightSide Advisors- Nimbleness and creativity are qualities rarely ascribed either to America’s financial regulators or to Congress. Perhaps that is one reason why both groups continue to fumble over how to deal with hedge funds, which typically exhibit both in abundance. These lightly regulated pools of private capital employ an array of complex trades, frequently shifting strategies and, in theory, generating above-average returns.

The argument for more regulation is twofold. First, nowadays it is not only a few aficionados of the investment world who are exposed to them but a growing number of people—either directly, if they are rich enough, or through their pension funds. Secondly, some hedge funds are so large that a big one’s failure could threaten the financial system.

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