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Kirsten Bischoff, Opalesque New York: This week The Bank of International Settlements (BIS) released its 78th Annual Report reviewing the financial markets. Providing an overview of the 2007-2008 year the BIS notes the hedge fund industry which at first felt much of the blame for market problems has shown itself to be a point of stability in the midst of the credit crisis. “Even though the first signs of strain to emerge were problems in hedge funds associated with large investment houses, the performance of the industry as a whole initially proved relatively robust. During 2007, returns on most hedge fund strategies compared favorably to those recorded in 2006. The main exception was the performance of fixed income funds, which slipped during 2007. Over the calendar year, net investor inflows to all fund sectors remained at levels comparable to those of the recent past.”

Providers of needed liquidity In an industry that has grown to oversee the investments of approximately $1.8 tln of the world’s wealth, hedge funds as well as other alternative assets have the potential to further serve as a driver towards the recovery of the global economy. The BIS cites the largest risk for worsening financial conditions to be “linked to the response of aggregate demand to the weakened position of banks and tighter lending standards.” It remains to be seen if non-financial firms have the abili......................

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