FSA - A Report Assessing Possible Sources of Systemic Risk from Hedge Funds

According to an FSA report, hedge funds were not a significant cause of the financial crisis, although they may potentially create systemic risk. Among the other interesting findings in the survey (of 50 FSA-regulated managers responsible for 100 funds):

• Assets under management increased in the survey period; assets below their high-water mark have remained stable;
• In most markets, the footprint of funds is modest;
• For most funds, leverage remains largely unchanged;
• Funds report being able to liquidate assets in a shorter time frame before, rather than the period after which their liabilities would fall due;
• Counterparty exposures remain fairly concentrated among five banks;
• Measures of portfolio concentration have remained largely unchanged.

[Lofchie comment: It's an interesting skim. I am an admirer of the analyses done by the U.K. regulators generally. Reading their reports, whether I agree with them or not, almost always leaves me with the feeling they are really trying to understand the markets.]

View report here (links externally to FSA website).