Investment banks face 'hedge fund hotel' inquiry

3 January 2007

Authorities in Massachusetts are launching an investigation into the leasing of office space to hedge funds by investments banks.

The investigation, led by Massachusetts secretary of state William Galvin, is looking into the practice of 'hedge fund hotels', where hedge funds are offered cheap rent by banks, but are then charged higher trading fees, which are passed on to investors.

Mr Gavin said: "It's really about fairness to average investors and openness in the financial-services industry."

He also revealed that he has asked for documents from UBS and the bank has confirmed it is aiding the authorities with enquires.

So far the investigation is described as at preliminary stages and only involves operations in Massachusetts.

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