Financial Times – Hedge funds are making the headlines again and it is not good news. Three small firms have recently collapsed amid allegations of skulduggery. A fourth has been implicated in the fraud charge brought against the chief executive of Refco, the futures broker.
Yet none of these scandals is unique to hedge funds – any one could have happened in any part of the investment industry. The explosive growth in hedge funds and their opacity might have caught investors off guard but there is nothing new that needs to be learnt from these events. The Refco scandal is the most recent but also most peripheral to hedge fund issues. Phillip Bennett, the futures broker’s chief executive, has been charged with defrauding investors by hiding $430m (£245m) he owed the company. The allegation is that Liberty Corner Capital Management helped conceal this debt at audit time in return for a fee.
