March 16 (Bloomberg) — Are hedge funds really the disruptive, destabilizing force their critics make them out to be?
Or do these free-wheeling partnerships of wealthy and institutional investors actually reduce volatility and help make the financial markets run smoother?
Those long-debated questions may soon be put to a telling real-life test. If credit turmoil spreads from the carnage in the subprime mortgage business, hedge funds stand to become the featured players in a heroes-or-villains drama.
It all depends on how events play out in the stock, bond, currency and commodity markets. Should the shakeup that began in late February turn into a messy, drawn-out affair, hedge funds are handy candidates for blame.
