Hedge Funds - Myths & Facts

'Did the hedge fund industry contribute to the global financial crisis? Did it make the crisis worse? In her weekly appearance on Bloomberg TV, Reason columnist Veronique de Rugy explains the truth about hedge funds by separating economic fact from economic myth.

Myth 1: Hedge funds are highly leveraged.
Fact 1: The market exposure of most hedge funds is less than twice the percentage of assets under management.

Myth 2: The hedge fund industry's tendency to take excessive risks, combined with a lack of regulation, was an important cause of the financial crisis.
Fact 2: Not only did hedge funds not precipitate the financial crisis, they did nothing to exacerbate it. If anything, hedge funds have helped the economy to
recover more quickly.

Myth 3: Most hedge fund managers are billionaires.
Fact 3: Who cares? But if you must know, the average hedge fund manager's yearly earnings are $336,000.

For additional information, see de Rugy's article "The Truth About Hedge Funds and the Financial Crisis." http://reason.com/archives/2011/03/18/the-truth-about-hedge-funds-an'

Some information that the BBC are somewhat coy about presenting being concerned with blaming the economic crisis on banks and hedge funds and not their allies in the Labour Party.

However I do wonder what the leverage ratio in the first part of the video is based on. Also I wonder whether whilst hedge funds are not highly leverage themselves but their assets (derivative) are.


Thanks to Theo Spark for the spot.