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Money managers under the microscope

Greece to welcome hedge funds?

April 7, 2010

Interesting report in the Telegraph that debt-laden Greece may have to turn to hedge funds for support in its next dollar bond issue.

Having effectively tried to exclude them from recent issues, a u-turn looks likely if it wants to raise anything like what it hopes, the paper says.

Such a report will no doubt be seized upon by the hedge fund lobby, who argue that hedge funds often step into markets as buyers when liquidity is scarce.

And it will be fascinating to hear any reaction from European politician Poul Nyrup Rasmussen, who in a visit to London last month accused hedge funds of raising Greece’s borrowing costs by 2.5 percent (a charge, it must be said, that was vigorously denied by the industry).

Rasmussen told a conference that “we cannot live with it (hedge fund speculation on CDS) anymore” and called for a ban or at least a limit, while a number of politicians have criticized hedge funds who buy the CDS without owning the underlying bond.

However, it seems unlikely that any purchase of the latest issue of Greek bonds would be driven by hedge funds’ willingness to comply with this…

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