Suggestions from Italian Finance Minister Giulio Tremonti that Italy could push for the abolition of hedge funds has the industry baffled. Speaking to Italian media at the G8 meeting in Washington, Tremonti said the rewriting of financial market rules should target 'absolutely crazy bodies, like hedge funds which have nothing to do with capitalism'. Asked if he was suggesting that hedge funds should be banned, he said: 'We have to launch a discussion about this.'

These comments came despite plans by the Italian treasury department - part of Tremonti's ministry - to launch a public consultation on a draft regulatory document reviewing current rules that prohibit pension funds from investing in hedge funds.

Tremonti's comments were promptly rebutted by representatives of the global hedge fund industry. Florence Lombard and Richard Baker, chief executives of the Alternative Investments Management Association and Managed Funds Association respectively, said in a joint statement that it would be a serious mistake to consider eliminating innovative private pools of capital that are an essential source of investment capital, in Italy as elsewhere in the world.

They added that the hedge fund industry in Italy was a model of successful regulation, provided excellent risk-adjusted returns for investors and was an important source for job creation. In particular, Lombard and Baker added, this was no time to think about abolishing an industry that was an essential source of liquidity.

Did Tremonti simply get a bit over-excited in Washington? Let's hope that when he and his colleagues sit down to think about any new financial world order, spirits are calmer and no-one tries to play to the grandstand.