September 15, 2006

RBA Warns of Hedge Fund Risk

The Reserve Bank of Australia (RBA) warned the investors to be aware of the risks involved with hedge funds. RBA sources said that lower macroeconomic volatility had been one factor encouraging a marked increase in the debt that households were content to carry in many countries, including Australia.

Financial innovation and competition have been at work on the supply side of the capital market. However, macroeconomic backdrop is critical. RBA said that a long period of low and stable interest rates could prompt people to engage in more risky behavior. In Australia, regulatory authorities draw no distinction between hedge funds and other investment managers. They are concerned with what the entity does.

Read my previous post titled "Most Hedge Funds to Stay Registered" to know more about the future of hedge funds.

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