The Securities and Exchange Commission is hip to the need for vigilance over the amount of leverage hedge funds use to boost returns, although it has no desire to regulate it, a senior SEC official said.

The warning comes at a time when numerous reports are predicting a bursting of the hedge fund bubble (see MME, July 11 edition: "Last Call for Hedge Fund Party?"). In fact, this morning's edition of The Wall Street Journal has a headline story on steep losses and huge redemptions at Madrid-based Vega Asset Management, which, with $11 billion of assets under management, is still one of the world's largest hedge fund managers.

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