Nov. 2 (Bloomberg) — It has been a terrible few weeks for hedge funds. In London, GLG Partners LP, one of the biggest companies in the industry, is under investigation. In New York, Refco Inc., one of the main brokers, has just collapsed. Tales of scandals are pervasive.
So, the gig is up, right? Time to fold up those funds, and go back to that job on the trading desk at an investment bank.
Well, hold on. The hedge fund industry can still salvage its reputation by policing itself better. The guys in the black hats need to be run out of town. If they aren’t, a system of statutory regulation can’t be far away.
“We are happy to entertain a code of conduct, but it would have to be voluntary,” said Emma Mugridge, a director of the London-based Alternative Investment Management Association, which represents hedge funds worldwide, in a telephone interview. “What needs to be established is how it would be made meaningful. It would have to encode sound practice within the industry.”
The apparatus of self-regulation hasn’t even begun to be assembled yet. Now is the time to start.
