Asked before August where they thought the next big financial blow-up would be, many would have said hedge funds. These beasts were leveraged, unregulated and had pay structures that encouraged their managers to take bets that would one year end in tears, the gloomsters argued. It was only a matter of time.

In fact, it has been the regulated and unexciting industries and institutions that have suffered the most. The hedge fund industry has emerged relatively unscathed. Something is being lost.

The hedge fund pioneers left the big investment banks in the 1990s partly to escape the suffocating compliance burden. But times are changing for London’s hedge funds. Sir Andrew Large’s proposals for higher standards merely reflect the priorities of their new masters: pension funds. Sir Andrew Large’s proposals for higher standards merely reflect the priorities of their new masters: pension funds.

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