Bank Of England Raises Systemic Concerns About Hedge Funds

Sep 25 2013 | 12:16pm ET

A specter is once again haunting the hedge funds of England—the specter of systemic importance.

At its first meeting under new Bank of England Governor Mark Carney, the U.K. central bank's Financial Policy Committee set its sights on the hedge fund industry, calling it a potential source of instability.

The committee said it doesn't know enough about how problems at hedge funds could weigh on their counterparties and institutional investors, and that the BoE and Financial Conduct Authority had joined forces to collect more information about the industry and put together "a more complete assessment of risks to financial stability."

The statement is something of a volte-face for British regulators, which in the past have downplayed the risk the financial system posed by hedge funds.

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