The loosely regulated hedge fund market presents a risk to the financial market and economists fear that another Amaranth Advisors situation could occur, but on a larger scale with more impact, The Wall Street Journal reports, based on its monthly survey of 50 economists.
Amaranth lost nearly $5 billion in one week after a bad bet on natural gas last month.
A quarter of the economists surveyed said this was only the beginning. “Amaranth is a small example of what happens under macroeconomic stress,” said Allen Sinai of Decision Economics, who warned a larger economic event could have catastrophic effects. “Amaranth is just the tip of the iceberg.”
Twenty three out of 41 economists said regulation and supervision of hedge funds is too light, 16 said they are “just right” and two said they are “too tough.”
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.