The SEC should create a unit to examine hedge-fund disasters — much as the National Transportation Safety Board investigates airline crashes, Andrew Lo, a highly regarded academic, proposes.
In addition to forming the "capital markets safety board," the Securities and Exchange Commission should require far more detailed reporting by hedge funds than the simple registration requirements the agency approved last month, Mr. Lo said.
Creating a board to investigate hedge-fund liquidations would help ensure "more stable financial markets, greater liquidity, reduced borrowing and lending costs as a result of decreased systemic risk exposures, and a wider variety of investment choices" to the public, Mr. Lo wrote in a paper slated for publication in the Journal of Investment Management this week.
