Hedge Funds and Financial Stability - Speech by Sir John Gieve at the HEDGE 2006 Conference

In a speech given today to the HEDGE 2006 conference, Sir John Gieve – Deputy Governor for Financial Stability – discussed the impact of hedge funds on the financial system and risks to financial stability.
Published on 17 October 2006

He suggested that the recent explosive growth of hedge funds was a response to technological advance and the innovation and specialisation that allowed. It was also part of a wider shift towards arms length finance. He concluded: “In the long term that shift should be good for stability”. Adding detail, he said “The active trading of hedge funds makes markets more liquid and facilitates genuine hedging activity by others – including systemically important banks. Increasingly, hedge funds – led by those managed from London – have become an important part of the risk transfer process”.

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