Washington Post – For years, hedge funds barely registered on the Washington agenda, and that was just the way they liked it.
These investment pools designed for wealthy individuals flourished in the shadows: They collected more than $1 trillion; seized control of underperforming companies; and increasingly drew money from gigantic pension funds, including those of government employees.
But now they are so large and numerous — there could be as many as 9,000 hedge funds — that federal regulators, state authorities and lawmakers are clamoring to learn more about them, including whether fraud and risky trading flourish in their secretive operations.
This week, the Securities and Exchange Commission staff confirmed that it was conducting a sweeping inquiry into whether hedge funds are misusing information they receive from investment banks to get a jump on trades and sweeten their profits. Last week, federal prosecutors in New York charged a fund manager with criminal securities fraud, saying it cost investors $88 million. And today, German officials are putting hedge fund risks at the top of the agenda of the Group of Eight meeting in Essen, Germany.
