"There's a lot of secrecy about what they do," Manuel added. "When people have been able to invest such large pools of funds without any regulatory environment, then you could induce instability because they can buy and sell stocks of companies and in fact bring about very, very rapid ruin."

The world's financial establishment has periodic fits of angst about hedge funds, and indeed the private equity market has absorbed anything up to US$200 bn in borrowings this year. But most economists think that the effect of hedge fund activity at least is to reduce rather than foment instability.

"There's also an enormous push by private equity funds to take companies out of public scrutiny, to make sure they're delisted," Manuel said. "In the context of financial stability, these are … issues that merit attention."

Currently the US Senate is studying the hedge fund sector, particularly after the courts knocked down the SEC's attempt to bring them under its wing earlier this year. The UK's FSA has said on many occasions that it does not see major risk in the hedge fund sector; but it is more worried about leverage in the private equity sector. The EU is also calm about hedge fund risk under the guidance of market liberal Charlie McCreevy, currently Financial Services Commissioner.

The G20 did not mention hedge funds in its final communique last week, although it 'welcomed ongoing efforts by a growing number of borrowing countries and private-sector creditors on the Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets to improve financial stability and enhance market access of emerging market economies.'

The members of the G-20 are the finance ministers and central bank governors of 19 countries, including Australia, Brazil, Canada, China, France, Germany, India, Japan, Russia, South Africa, the United Kingdom and the United States.

The communique also said: 'Further to our 2004 commitment to achieving high standards of transparency and exchange of information for tax purposes, we welcome the release of the Global Forum on Taxation 2006 assessment which shows that progress has been made in the implementation of those standards. Further progress is needed and we encourage
continuing implementation efforts and call on those countries and territories that have not yet implemented high standards of transparency and exchange of information to do so.'