Tim Martin's blog

Apparently the EU is making a ham-fisted attempt to interfere with the remuneration of fund managers, including hedge funds, which smells of populism to me. The entire point of hedge funds is that the only people who can invest in them are people who understand the risks they’re taking on, and investors are the only people who stand to lose money as a result. I’ve yet to see any explanation of how hedge fund activities contributed to the banking crisis; the mood in these straitened times is that if anyone has money, they must have stolen it.

More broadly, the moral charge being made against the institution of banking makes little sense to me. Certainly individual banks have shown themselves to be grossly incompetent, but there seems to have been very little knowing malfeasance. The banks concealed the risk unwittingly, and could only do so with the (equally unwitting) aid of politicians, the financial press and the general public, all of whom wanted to believe in the Emperor’s Clothes.

The idea that substantial numbers of people had foresight of the banking crisis seems to be a fiction, but let us suppose for a moment that such people existed. I may be naive, but I don’t see how the actions of the banks can have damaged these people. In financial trading, knowing something that your peers don’t (about the instability of the global financial system, say) is typically profitable. Such people could have made vast amounts of money betting against the consensus, or if they didn’t fancy the risk, kept their portfolio safe by avoiding exposure to riskier stocks and bonds and taking a larger position on gold.

Where the shrill charge against the banks is coming from those who base it only on hindsight, I have little sympathy. These people seem to want to have things both ways: asking no questions about the run-up in asset prices during the good times, and demanding compensation in the bad. Those who dislike the banks are free to opt out of their services, but the banks do not owe us a living.

Apparently the EU is making a ham-fisted attempt to interfere with the remuneration of fund managers, including hedge funds, which smells of populism to me. The entire point of hedge funds is that the only people who can invest in them are people who understand the risks they\'re taking on, and investors are the ...