RBA governor warns of hedge fund influence

15 September 2006

The incoming governor of the Reserve Bank of Australia (RBA) has warned that hedge funds could have a destabilizing impact on financial markets, compromising their efficient functioning.

In a speech delivered at a banking conference in Hong Kong, Glen Stevens said that the funds had already had an effect on markets in the US and Australia, but that smaller economies like Hong Kong's were likely to feeling the negative effects of the funds in the near future.

"Small countries, including Hong Kong, have on occasion felt as though hedge funds were singling them out for rough treatment, and that the resources available to hedge funds far exceed those of a small country seeking to maintain, for macroeconomic management reasons, a particular constellation of interest rates and exchange rates," Mr Stevens said, according to a transcript of the speech obtained by Forbes.

He added that regulators needed to help inform potential hedge fund investors about the risks involved, meaning that the funds would need to disclose more information than they were currently doing.

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