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Edited by Steven Irvine

Overgrown and full of deadwood

Size is a well-known impediment to fund-management sprightliness and profitability. As traditional institutional investors leap belatedly on the bandwagon, that's become as true of hedge funds as of staider operations. The likely outcome: significantly declining returns. By Mike Steinberger.

Western lawyers and financiers have laboured hard and long to achieve Middle Eastern financings which comply with Islamic law. A recent legal innovation may hold the key.

The love affair between increasingly yield-hungry European investors and corporate borrowers is becoming ever more passionate. Their sweet nothings include high yield bonds, convertibles, exchangeables and dealer remarketable securities. Rebecca Bream checks out some of the hottest dates in the market.

The clearing system grinds to a halt and the single European currency collapses under the weight of Italian debt. But that was 1570. This time, argues Ronald Layard-Liesching, monetary union will bring devastating capital flows, bank failures and regional recession. And that's just the good news.

Pensions are the greatest pyramid scheme ever, argues Arnab Banerji. As Europe turns from unfunded to funded schemes it will need the higher returns that only emerging markets can provide.

A troubled government that swaps domestic debt for foreign currency-denominated debt would seem to be inviting catastrophe - isn't that what dumped Asia in the mire? But Russia has done exactly that. Alex Jurshevski argues that this and other measures are just what Russia needs.

Euromoney's cover story in April "Sinking the unsinkable" raised the issue of apparent unwillingness among European governments, official bodies and even private-sector financial institutions to address the possibility of a break-up of European monetary union in the first years following the introduction of the euro in 1999. Consultants at Mitchell Madison, a firm set up in 1992 by five ex-McKinsey professionals and now employing more than 600 people worldwide, have been investigating the same question. In July, the firm released the findings of a survey of UK-based financial institutions including asset managers responsible for £1.1 trillion ($1.8 trillion), or 40% of the UK's assets under management.

Controversial rules designed to monitor and control borrowing by private and public-sector companies are being finalized by Egypt's ministry of economy. Senior government officials say the measures will prevent the economy from becoming vulnerable to an Asia-style collapse. If they aren't blocked by another government department, the new regulations, the Sphinx Protocol, should be published in coming weeks. The ministry of economy's plan would create a database of all current and potential bond issuers. Advance details of issues would be required, including the volume, maturity, coupon, currency and market of issuance. The reporting system will also be used to control the quality and quantity of borrowings.

Currency unions have come and gone but this is by far the biggest and boldest experiment of them all. The euro will wrench market share from the dollar as an international and reserve currency. It will trigger a gigantic rebalancing of investmetn portfolios. It will stimulate growth in equity markets and labour mobility. Yet it also threatens to tyrannize the economic management of individual states and pitch Europe towards the imperative of a single economic policy. In the following series of articles, writers and economists describe euroland, what forces will drive it, and what impact it will have on banking, finance and international markets.

For some, life after a career in finance means the priesthood or opending a restaurant. But Anthony Hotson left Warburg Dillon Read last month to study old stones.