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Hands Off Hedge Funds

Author: Sebastian Mallaby, Paul A. Volcker Senior Fellow for International Economics
January/February 2007
Foreign Affairs

The massive growth of hedge funds has sparked warnings of instability and demands that the industry be regulated. But the fear of hedge funds is overblown, based on a misunderstanding of their role in the international financial system. In reality, hedge funds do not increase risk; they manage it -- and policymakers, rather than clamping down, should make sure hedge funds have the tools to perform this function well.

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