Washington Post – The Treasury Department yesterday assembled two blue-ribbongroups that will explore ways to minimize the risks associated with hedge funds, the latest step to promote accountability in the $1 trillion sector without restricting its growth.
Hedge funds are private investment pools designed for wealthy individuals and institutions, but in recent years they have increasingly attracted a broader array of clients, including state retirement and pension plans. Because hedge funds are subject to far less oversight than many other investments, lawmakers have questioned whether they could mask fraud and pose broader risks to the economy.
Treasury Secretary Henry M. Paulson Jr. and Deputy Undersecretary Robert K. Steel, both former Goldman Sachs executives, have rejected the need for new regulations. Instead, the Paulson-led President’s Working Group on Financial Markets issued a report in February encouraging the funds’ trading partners and Wall Street backers to exercise their muscle and act as a check on the funds.
Yesterday, government officials unveiled two panels composed of hedge fund managers and prominent investors, both charged with developing a voluntary set of best practices regarding risk management and information disclosure. Each of the committees will issue written guidance by the end of the year, Steel told reporters at a news conference in Washington.
