Hedge funds brought to book

THE £556bn hedge fund industry may be forced to open its books if Ministers meeting at a financial summit in London this year get their way.

An ultimatum to the funds to give details of their investments or be branded as cowboys is likely to be considered in September by ten leading industrialised nations at the Financial Stability Forum.

The funds - whose huge and often secretive investment positions are increasingly seen as a threat to financial stability - would be invited to sign a voluntary code of conduct committing them to much greater transparency.

Financial regulators fear that were they to try to supervise the estimated 8,000 funds fully, they could be held liable by distressed investors should a fund become insolvent.

The Bank of England, in its half-yearly Financial Stability Review, warned that after a few recent months' poor trading, investors in hedge funds could rapidly pull their money out, putting the financial system under stress.

The Group of Seven rich nations faces chaos next year when Russia takes over the presidency of its political sister, the Group of Eight.

This would usually mean that Russia also presided over the G7, but it is not a member of the economic club.