The man who broke the Bank of England

Hedge funds can cause currency movements in minutes

This week sees the arrival in Britain of George Soros - the international speculator who now aims to reform global capitalism. He will be addressing the House of Commons Treasury Select Committee, and giving a number of press interviews, on the dangers of unregulated free markets.

Mr Soros, who operates one of the world's biggest private investment funds, is famous for having made $1bn by betting on the devaluation of the pound sterling in 1992.

George Soros has turned from speculation to philanthropy

His Quantum Investment Fund claims to be the world's most profitable. This year, an article he wrote in for the Financial Times newspaper on the need for Russia to devalue its currency precipitated the fall of the Russian Government, a massive default on its debts, and widespread financial panic.

But Mr Soros has aspirations to be more than a speculator. He has donated millions to charitable foundations, most notably to help Eastern Europe.

And now he has surprised his crtics by calling for more international regulation of markets - a surprising admission perhaps from someone worth $5bn.

Panic swept through Russian financial markets after the Soros article

The 67-year-old financier was born in Hungary, but emigrated to England when he was 17, after the communists took power.

He studied philosophy at the London School of Economics with Karl Popper, whose views on the need for open and tolerant societies as a precursor of economic growth, he adopted as his own.

After selling souvenirs in Wales, he joined London stockbrokers Singer & Friendlander before moving to Wall Street in 1956.

He set up the Quantum Fund in 1969 as one of the world's first hedge funds. Registered in Curacao in the Caribbean, but run from Manhattan, the fund took money from rich individuals and invested in risky, but potential highly profitable international deals.

The fund profited hugely from the collapse of fixed exchange rates in the l970s and the deregulation of global capital markets. By l980 Soros was worth $25m and his fund $100m.

Philanthropy

In the l980s Mr Soros moved into charitable giving, saying he already had enough money to live on. He began by setting up the Soros Foundation to give money to support democracy in Russia and Eastern Europe, calling his first initiative the Open Society Fund.

By the l990s he was giving away over $300m a year, providing more aid for some countries than the US government. His interests recently turned to drug reform in the US, where he has supported efforts to legalise soft drugs, and help for immigrants affected by welfare reform.

Not infallible

Even the Quantum Fund, which has turned an investment of $1000 in 1969 into $3m today, is not infallible.

Mr Soros lost $800m in the l987 stock market crash by betting that the Tokyo Stock Market would crash first - reasonable on economic grounds, but defeated by government intervention.

He is also reported to have lost $600m this year betting the wrong way on the Japanese yen, which had to be rescued in June by US intervention.

But he is part of a group of international private investors with an estimated $100bn in assets who can significantly affect global markets.

In September, another hedge fund, Long Term Capital Management, had to be rescued by the world's major banks for $3bn - at the behest of the US Federal Reserve - because of the risk to the whole world's financial system if that fund were to fail.

In October, Mr Soros had to restructure his own investment companies. He closed the Quantum Emerging Growth Fund, which lost one-third of its value after taking a big loss on its Russian investments, and merged another, after disclosing losses of $2bn.

Reform necessary

It has perhaps been the experience of the past year, where global financial turmoil swept through the markets, that has led to his call for further international regulation of capitalism.

What Soros fears more than anything else is a protectionist backlash which would close markets and lead in his view to the strengthening of authoritarian regimes.

He has clashed repeated with Dr Mahathir Mohamad, the Prime Minister of Malaysia, who has imposed capital controls on his country's currency. Dr Mahathir has criticised "immoral financial speculators" while Mr Soros has described Dr Mahathir as a "menace to his country."

Many of George Soros's prescriptions for reform - for more information about bank lending in developing countries, and for an IMF lending facility to prevent crises - are now being adopted by Western leaders.

It would be ironic indeed if the king of speculators has become the saviour of global capitalism.