WEST PALM BEACH, FL (www.hedgeco.net) – The rapid growth of assets managed by the global hedge fund industry has led to increases in potential risks facing financial markets and also the banks, whichdo business with hedge funds, according to Standard and Poor�s. Last week, the Bank for International Settlements in Basel Switzerland commented on the rising level of Banking Institutions� exposureto Hedge funds.

According to BIS, while altogether banks had strengthened controls around hedge funds, however their exposure levels to Hedge investment portfolios were on the rise. BIS stated, “Given the rapid growth in assets under management and the intensifying competition for prime broking business, the overall exposure of banks to the sector is arguably higher and the information flow less transparent.�

S&P credit analyst, Tom Foley, said, “Although the direct effects of poor performance of any hedge fund is expected to be minimal, systemic risks are a greater concern.� The S&P report suggested that that a system wide failure, which led to the collapse of the Connecticut, based hedge fund manager, Long Term Capital Management is still possible today.

However many hedge fund industry analysts believe that several steps have been put in place to prevent another LCTM type collapse. Some point to the reduction of the leverage employed by hedge fund managers as an example, in addition to improved transparency that was largely absent during the LCTM days. The S&P report also acknowledged that the due-diligence and risk tolerance levels of investment banks have also improved from the LCTM days.

Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net

HedgeCo.Net is the most popular hedge fund database and community in the world. Membership on HedgeCo.Net is free and easy. We also offer free listings for Hedge Funds!

Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com.