G7 calls for vigilance on hedge funds

ESSEN, Germany, Feb 10, 2007 (AFP) – Group of Seven (G7) finance ministers and central bank chiefs called Saturday for “vigilance” on hedge funds, a trillion-dollar industry that has grown strongly and rapidly in recent years. “Given the strong growth of the hedge fund industry and the instruments they trade, we need to be vigilant,” the world finance chiefs said in a final communique issued at the end of their two-day G7 summit here.

Germany, the host of the meeting, has repeatedly expressed concern over potential risks to financial stability from hedge funds, highly speculative and aggressive investment instruments that are estimated to manage 1.4 trillion dollars (1.1 trillion euros) in assets worldwide.

Berlin has long campaigned for increased transparency and even regulation of the largely uncontrolled sector.

But it has been forced to scale back its ambitions in face of scepticism in the United States and Britain, where most of the funds are based.

In its final communique, the G7 — which groups Britain, Canada, France, Germany, Italy, Japan and the United States — said that hedge funds had “contributed significantly to the efficiency of the financial system.”

“Nevertheless, the assessment of po