Permission to fail

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In the wake of the financial crisis, calls for more and better financial regulation are growing too loud to ignore, and the hedge fund industry has not escaped scrutiny. But the key to its future, believes Richard Baker, head of the Managed Funds Association, the Washington, DC-based industry body, is to preserve the ability of individual funds to fail.

Recent history is against him: the collapse of hedge fund Long-Term Capital Management (LTCM) in 1998 has been much on the minds of regulators.