Christopher Byron of the New York Post must have spent the weekend sharpening his axe, since he came out Monday hacking away at the hedge fund industry. While we applaud Byron for his weekly exposes on criminal malfeasance and graft in the world of Wall Street, it appears he's overstating matters a bit in his denunciation of the hedge fund business. (Or, as he prefers to call it, the "hedge fund racket.") He also calls it the "murky and crime-infested world of hedge funds," where the latest case of hedge fund fraud is seemingly just around the corner.

For another take on the hedge fund industry, check out my article over at Tech Central Station ("Don't Trim the Hedges"), which makes the case that hedge funds actually play an important role in the international financial markets, supplying liquidity and promoting market efficiency. In terms of actual fraud cases filed with the SEC, the hedge fund industry is actually doing better than one would expect -- It's just that the media tends to focus on cases like Bayou, and not on the bigger picture. As I wrote earlier, hedge fund managers are not "James Bond villains with MBAs."

Stephen Bainbridge also agrees that the hedge bet is no winner, when it comes to the rule requiring hedge fund managers to register with the SEC:

"...Mandatory disclosure does not prevent fraud. Securities managers who are going to commit fraud will not be deterred from doing so by government disclosure rules -- they will simply use the approved disclosure form to do so. Hence, rigorously enforced proscriptions of fraud seem far more important than mandatory disclosure, insofar as one is the sort of thing that allegedly happened Bayou Securities."