Bernanke backs status quo for hedge fund oversight

WASHINGTON – The current market-based system is the best way to regulate the trillion-dollar hedge fund industry although improvements can be made, Federal Reserve Chairman Ben Bernanke said Wednesday.

Bernanke, speaking to a conference on global economics in New York City, said the current system is superior to increased government regulation. That view is at odds with critics who say large failures in recent years highlight the need for greater supervision.

“Thus far, the market-based approach to the regulation of hedge funds seems to have worked well, although many improvements can be made,” Bernanke said in remarks to a global economic conference sponsored by the New York University law school.

Bernanke said he supported the conclusions reached by the President’s Working Group in February, which stated that what the hedge fund industry needed was increased vigilance on the part of investors rather than new government rules. “To be clear, market discipline does not prevent hedge funds from taking risks, suffering loses or even failing – nor should it,” he said.