Heresy! Fund manager wants leverage limits

May 28, 2009 | By Jim Kim

Some might view this as "pulling a Jerry McGuire": Veteran hedge fund manager Paul Singer, of Elliott Management, said at the Ira Sohn Investment Research Conference that regulators ought to limit leverage. Of course, he's talking about limits on banks, not hedge funds. "The stark truth is it was not hedge funds that blew up the world, it was regulated entities or their affiliates," he was quoted as saying, by Reuters.

The best way to prevent another bank-driven meltdown would be to limit their use of leverage. But what about hedge fund leverage? Well, many of them rely on their prime brokers for leverage, and the conventional wisdom is that the top brokers are providing a lot less liquidity. Still, you will be hard pressed to find a hedge fund manager who favors government regulation of how much they can borrow.

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