Hedge funds... friends or foes?

Foreign affairs have a good article about the role of hedge funds. The article also points that even though hedge funds have received a lot of heat over the years they actually perform an important role with regards to liquidity and risk management. Here is a brief summary:

The massive growth of hedge funds has sparked warnings of instability and demands that the industry be regulated. But the fear of hedge funds is overblown, based on a misunderstanding of their role in the international Þnancial system. In reality, hedge funds do not increase risk; they manage it -- and policymakers, rather than clamping down, should make sure hedge funds have the tools to perform this function well