New York (HedgeCo.net) – As the Financial Stability Oversight Council mulls over who will be subjected to higher levels of regulatory scrutiny, the Alternative Investment Management Association (AIMA) today re-iterated its belief that no hedge fund manager based or operating in the US or elsewhere currently poses a risk to financial stability.

“We believe that no single hedge fund firm today is sufficiently large, leveraged, complex or interconnected that its failure or financial stress would cause a market disruption sufficient to destabilise the financial system,” the Chairman of the global hedge fund association Todd Groome, said.

Both the UK’s Financial Services Authority hedge fund risk report and the FSA’s hedge fund survey, found that major hedge funds ‘did not pose a potentially destabilising credit counterparty risk’, and that none of the large hedge funds they have examined currently poses ‘a significant systemic risk to the financial system’.

“Hedge funds collectively represent a relatively small group of extremely heterogeneous and often very small businesses, and even their collective positions and exposures are not such that individual failures pose a risk to financial stability,” Groome said. AIMA also stressed that hedge fund firms employ significantly lower levels of leverage than banks and some other financial institutions.

“By having managers register with and report to the Securities and Exchange Commission and other national authorities, including FSOC, more data will be available to allow better monitoring and assessment of markets. As such, hedge funds can contribute to a more effective systemic risk monitoring system,” Groome concluded.

Editing by Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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