ECB touches on some hedge fund myths in new report
Jun 10th, 2008 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation
Every 6 months, the European Central Bank issues a state of the union report on the financial system called the “Financial Stability Review” (see posting on the last edition).
The stated purpose of the report is:
“…to promote awareness in the financial industry and among the public at large of issues that are relevant for safeguarding the stability of the euro area financial system. By providing an overview of sources of risk and vulnerability for financial stability, the review also seeks to play a role in preventing financial crises.”
As usual, June’s edition (released on Monday) makes some interesting observations about hedge funds and their potential role in “financial crises”…
Hedge funds use relatively little leverage
According to Merrill Lynch data cited by the ECB (chart, right), hedge funds use markedly less leverage than is often assumed in the media. In fact, only a small portion of hedge funds reported having a gross exposure of more than 200%. Commented the ECB:
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