Houston Chronicle – WASHINGTON – High-flying investors are pouring tens of billions of dollars into hedge funds in the expectation of large returns, but financial experts worry that, in the event of a market-rattling surprise, these funds could spread havoc through financial markets.

While hedge funds cater to institutions and the wealthy, experts say they have grown so large that, in a worst-case scenario, the failure of a few hedge funds could disrupt the banking system and hurt ordinary people too.

Read Complete Article

Houston Chronicle – High-flying investors are pouring tens of billions of dollars into hedge funds in the expectation of large returns, but financial experts worry that, in the event of a market-rattling surprise, these funds could spread havoc through financial markets.

While hedge funds cater to institutions and the wealthy, experts say they have grown so large that, in a worst-case scenario, the failure of a few hedge funds could disrupt the banking system and hurt ordinary people too.

Hedge funds are lightly regulated investment pools that, unlike mutual funds, can bet on everything from real estate to energy futures. To achieve the eye-popping returns that investors have come to expect, they can engage in risky strategies, such as loading up on debt and engaging in unlimited short-selling — betting that an asset will fall rather than rise in value.

Read Complete Article