LettersAs coronavirus shocks stock markets, why call to ban short selling is absurd
- Hedge funds should not be held responsible for market declines at a time when much larger traditional funds have been heavily selling stocks
- Hedge funds short stocks to protect the investors in their funds, which include pension plans
Hedge funds are a small part of the investment funds industry and cannot be held responsible for market declines at a time when there is clear evidence that much larger traditional funds have been heavily selling stocks.
Hedge funds short stocks to hedge against downward movements in markets. They do so to protect the investors in their funds, which include pension plans, and so far they have been doing a pretty good job of it.
To say they are seeking to profit from others’ misery is completely untrue. They have a duty to protect their investors who in large part have entrusted the retirement savings of millions of people to their care.
Further, regulators of some of the largest markets have since publicly acknowledged it. Those countries who have imposed short selling bans in the last month have not seen their markets fall by any less.
To ban short selling would further underline the fragility of markets today and, despite several European countries having unilaterally imposed such bans, this must not become a global reaction.
Jack Inglis, CEO, Alternative Investment Management Association
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