They're playing with fire

Author: | Published: 1 Jul 2007

Sam Jones
Staff writer

If hedge funds were a country, they would have the eighth largest GDP on the planet. The top 100 hedge fund managers alone control $1 trillion of hedge fund assets – a figure that has risen 39% over the past year. And the biggest funds are banks.

JP Morgan Asset Management – the world's largest hedge fund manager – holds more than $33 billion in hedge fund assets. Goldman Sachs Asset Management is a close second. It manages $32.5 billion.

The rest of Wall Street is scrambling to catch up. In March, Lehman Brothers bought a 20% stake in DE Shaw, the world's fourth largest fund. Morgan Stanley forked out $600 million in October for stakes in Lansdowne and Avenue Capital.

Imitation may well be the sincerest form of flattery, but this ownership and operation of hedge funds is causing problems for bankers' counsel.

With the development of hedge...