Leave your feedback Share Copy URL https://www.pbs.org/newshour/show/hedge-fund-losses-prompt-calls-for-regulation Email Facebook Twitter LinkedIn Pinterest Tumblr Share on Facebook Share on Twitter Transcript After a drop in natural gas prices caused an Amaranth Advisors hedge fund to lose a record $6.4 billion in September, hedge funds are facing a barrage of criticism from policy-makers who are calling for greater regulation. Read the Full Transcript Notice: Transcripts are machine and human generated and lightly edited for accuracy. They may contain errors. JIM LEHRER: Hedge funds. They are back in the news, with calls for greater regulation and a Securities and Exchange Commission investigation of some alleged insider trading. Our economics correspondent, Paul Solman, chronicles the rise and the risks of this particular kind of investment. PAUL SOLMAN, NewsHour Economics Correspondent: The natural gas pit at the New York Mercantile Exchange went crazier than usual in September, when the Amaranth hedge fund bet on a short-term rise in natural gas prices, while, in fact, prices fell.Amaranth's investors lost their pants, the already troubled Pension Fund of San Diego alone more than $100 million. The State University of New York at Stony Brook had nearly 7 percent of its entire portfolio invested. And other hedge funds are reported to be on the rocks or folding, as well.The losses again raised the specter of market contagion and financial panic, last seen in headlines back in 1998, when a hedge fund named Long-Term Capital Management lost $2 billion. And Senator Charles Grassley is now warning that the next hedge fund to go belly-up could leave America's pension-holders in the ditch.As for Amaranth, it's going out of business, ironic since it's named, like this amaranth plant here, for the Greek word meaning "immortal." Now, the Amaranth affair caused no panic. But for years, people have warned that hedge funds are too big, unregulated, a disaster waiting to happen. And they're now a $1.2 trillion industry.So Amaranth's demise seemed a good excuse to try to explain what hedge funds are and how they can lose so much, so fast. Since Amaranth itself is keeping mum, we'll try to explain, by concocting a pretend hedge fund of our own, the Over the Hedge Fund. And it seems I actually could have started such a fund, even from my own house, which is in real life just over the hedge.Even someone like me could start one, it seems, because, after the stock market swoon of 2000 — depicted here with the usual stock footage — investors, including managers of pension funds like yours, were looking for higher returns. Hedge funds promised to deliver them.