(updating with Steinbrueck comments)
ESSEN, Germany (AFX) - G7 finance ministers and central bank governors said they need to be 'vigilant' over hedge funds.
'Given the strong growth of the hedge fund industry and the instruments they trade, we need to be vigilant,' they said in a communique issued following a two-day meeting here.
'We therefore agreed to further pursue the issue,' they added.
The G7 said hedge funds have contributed significantly to the efficiency of the financial system.
But it added: 'The assessment of potential systemic and operational risks associated with these activities has become more complex and challenging.'
It said it will exchange views with the private sector and ask the Financial Stability Forum to update its 2000 Report on Highly Leveraged Institutions.
German Finance Minister Peer Steinbrueck said the FSF will be asked to complete the new report in time for the May meeting of G8 finance ministers.
And he said G7 deputy finance ministers will hold talks with the management of some hedge funds, which will be encouraged to develop and implement 'best practices'. newsdesk@afxnews.com jfb/pp/sw/sw/pp COPYRIGHT Copyright AFX News Limited 2006. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited