Irish Independant- Over the next week the credit crunch which has squeezed financial markets around the world may get worse as financial institutions attempt to roll-over or re-finance €82bn in commercial paper. This is a game of pass the parcel where the core prize is a nuclear device set on a timer and all of the banks are looking to see who will be left holding it.
Inevitably a lot of entities administered out of the IFSC, such as hedge funds of special purpose vehicles (SPVs), will get burnt. Inevitably too less-informed commentators will shriek that it is a sign of inherent weakness in what is now one of the top 20 financial centres in the world. They will say that what is needed is greater regulation and tighter legislation.
Hedge funds are private, largely unregulated funds which attempt to make money no matter whether markets are going up or down. They currently control $1,700bn (€1,200bn ) in assets. Special purpose vehicles are entities which distance a company from the risks of a particular investment or portfolio of investments.
The simple fact is that, when there is a crisis in the financial markets the jurisdictions which are best at attracting entities such as these are the ones which are hardest hit.
More than one in three hedge funds are now administered out of Ireland. That means one in three of those which fail are likely to be administered here. No rocket science involved.
