I was long puzzled by one question that supposedly well informed hedge fund clients kept asking over recent months: have we seen the worst yet? It took a while for the penny to drop as to what was really being asked – not the direction of the markets but a clue from an insider exposed to the practices of hedge funds as to the scale of unknown horrors that may be lurking. Not even a hefty dose of aspirin helped the instant headache that developed when I explored the question with my crystal ball.

Three interwoven features leapt to mind: the largely unregulated nature of hedge funds; the poor quality valuation information available to investors; and the absence of any real system of control over hedge funds’ operating practices before disaster struck.