HedgeCo.Net — The International Monetary Fund said hedge funds have more than tripled in size over the past decade and now play an increasingly central role in trading, liquidity provision and risk transfer, while warning that their use of leverage and their opacity can inject risk into the financial system. The findings come from a chapter of the IMF’s Global Financial Stability Report released on Tuesday, ahead of publication of the full report on October 13.
According to the IMF, hedge fund assets stood at roughly $13 trillion in early 2026, compared with about $4 trillion in 2013. The fund said that growth has come primarily through leverage, including synthetic leverage obtained through derivatives. Hedge funds have also expanded their footprint in sovereign bond markets, particularly U.S. Treasuries, where they now account for about 9% of the market, up from 4% in 2022.
The IMF acknowledged that a larger hedge fund presence can improve market efficiency, but said leveraged positions and comparatively few constraints on risk-taking can amplify stress when conditions deteriorate. It described the industry as “inherently opaque,” said data gaps make it difficult to gauge exposures accurately, and urged policymakers to close those gaps and strengthen risk monitoring of the sector.
The industry is pushing back on some of the policy responses already in motion. Reuters reported on Wednesday that the Alternative Investment Management Association wrote to the Bank of England warning that proposed central clearing in the gilt repo market could create “new vulnerabilities” and lead to greater volatility in times of stress. In the letter, signed by global head of markets Adam Jacobs-Dean, AIMA argued the changes could push hedge funds toward shorter-term daily repo financing rather than typical two-week deals. Net borrowing in the gilt repo market totals around £200 billion, of which about £85 billion is by hedge funds, according to Bank of England data cited by Reuters.
For allocators, the IMF’s framing matters because it is likely to inform the next round of rule-making on margin, clearing and reporting. Strategies that depend on cheap, stable repo financing, such as Treasury basis and relative-value trades, are the most exposed to any tightening of funding terms or new transparency requirements. Investors should expect managers in those strategies to face more questions on financing tenor, counterparty concentration and how their books would behave in a disorderly sell-off.