YET ANOTHER idea to encourage people to save more for the long term emerged from the City watchdog this week. It was to allow private investors to put their cash in hedge funds, the ultra- risky, but in some cases spectacularly performing vehicles now the preserve of institutional investors and the wealthy.
The Financial Services Authority is canvassing views from the fund management industry to consider whether it would be viable to start selling hedge funds to "ordinary" customers, those with considerably less than the present minimum investment in most hedge funds of around pounds 100,000.
The FSA is also gauging professional opinion on whether hedge funds - completely unregulated because they are based in offshore tax havens - should be brought under its attentive gaze.
It is no coincidence that the issue has come up now. Many private investors are nursing substantial losses on investments, which have been slaughtered by two and a half years of falling stock markets.
At the other end of the spectrum, those rarefied few in successful hedge funds have actually benefited from the slump in the stock market because these funds make their money from selling shares in the expectation that their price will fall.
As hedge funds are not allowed to market themselves widely in the UK now, it is hard to know whether people would want to risk their money in them.
But the evidence from America, where it is much easier for investors below the category of super-wealthy to access hedge funds, is that they are reasonably popular.
And given there is plenty of speculation that the FTSE 100 has further to fall, it seems to make sense to give private investors the chance to make money from the downside, along with fat-cat institutions.
Yet, for most private investors, the drawbacks of hedge funds are overwhelming.
A common misconception in the hedge fund debate is that, because we have been in a period of falling markets, hedge funds have creamed in the cash. In fact, on average, the funds have not met their benchmarks.
There have been some very well-performing hedge funds, but there have been others which did appallingly but have been able to pack up quietly because they are secretive and unregulated. …