
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, April 14, 1994                   TAG: 9404140321
SECTION: BUSINESS                    PAGE: B-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

SEC WANTS LESS SECRECY IN HEDGE FUNDS

Hedge funds, the high-rolling investment funds that lost billions in the stock market's recent dive, do not pose a significant risk to the nation's banks, a top Treasury official told Congress on Wednesday.

But Eugene Ludwig, comptroller of the currency, said regulators should be concerned about the potential damage these funds can cause to financial markets as a whole.

Ludwig, lead witness at a House Banking Committee hearing, said eight national banks and nine national banking companies have a total of $1.04 billion in credit exposure through loans or lines of credit to the funds.

``Our examiners report that those banks are adequately controlling those risks,'' said Ludwig, whose agency is an arm of the Treasury Department.

However, the rapid growth and volume of complex trading strategies, combined with advances in communications technology, ``has increased the rate at which shocks spread throughout the financial system,'' he said.

Tuesday, a Securities and Exchange Commission report said hedge funds need to surrender information about their secretive dealings, but they don't require new regulation.

In the report, SEC Chairman Arthur Levitt Jr. said he shares the concerns of some members of Congress about ``the ability of such funds to contribute to volatility in global financial markets.''

Hedge funds, which are largely unregulated, gamble borrowed money on bonds, stocks and other more exotic investments derived from the value of ordinary securities, known as derivatives.

Levitt said an SEC staff review concluded there was no need for new regulation of the private investment funds and current rules for mutual funds aren't appropriate for hedge funds.

However, the SEC said it wants more information on the funds - such as the principal owners, traders and actual trades executed.

Hedge funds cater primarily to the super rich; entry fees for top funds can be $1 million or more, according to Mutual Fund Monthly, a San Diego-based newsletter.

Track records of these secretive funds are impressive. One study by Nashville investment adviser George Van showed 10 hedge funds yielded a 48.7 percent compound return in the last three years, compared with a 16.3 percent gain by the Standard & Poor's 500 index, a common barometer of Wall Street activity.

by CNB