British Regulators Seek Info On Hedge-Fund Interest-Rate Exposure

Sep 18 2013 | 11:05am ET

The U.K. Financial Conduct Authority is scrutinizing some large hedge funds in the wake of a spike in interest-rate market volatility.

The FCA sent a letter in early August to a number of hedge funds, asking for information about their exposure to rising rates. Some believe June's wild interest-rate moves were the result of a hedge-fund sell-off.

The hedge funds approached do not appear concerned about the probe itself. But they are worried about the fate of the information they have been asked to provide.

"It represents a new approach and is probably in line with the increased level of regulatory attention hedge funds are receiving," an executive at one recipient of an FSA request told Risk.net. "The most interesting angle probably relates to the footprint of hedge funds in particular trades and hence the liquidity risk of them heading for the exit. But I'm still not clear how they will use the information without telling market participants about the positioning of other funds. This would directly impact pricing if it happened and might self-fulfill the run for the door."

A bank derivatives trader put it more succinctly: "It's interesting that the FCA would ask hedge funds about their sensitivity to interest rates because they're effectively asking them for positions. I'd be very nervous about what happens to that information if I were them."


In Depth

FINtech Focus: Fundbase Aims To Revolutionize Access To Hedge Funds

Jan 23 2015 | 11:03am ET

Global investment in financial technology—also known as fintech—is booming....

Lifestyle

Looking For A Hedge Fund Manager? Try Davos

Jan 28 2015 | 8:48am ET

Davos, Switzerland seems to have become the hedge fund capital of the world—at...

Guest Contributor

From Switzerland With Love: Some Hard Truths About Central Banks And Risk

Jan 23 2015 | 7:54am ET

In the wake of the Swiss National Bank uncoupling the country’s currency from...

 

Editor's Note