Treasury: Hedge Funds Not As Risky As Thought

Dec 18 2013 | 4:36pm ET

Hedge funds are perhaps not as risky as regulators feared when crafting new rules in the wake of the financial crisis, according to the U.S. Treasury Department.

Richard Berner, who heads the Treasury's Office of Financial Research, itself created in the wake of the crisis, said that a preliminary analysis shows that hedge funds do not present a systemic risk to the U.S. economy. Berner cautioned that the conclusions "are very tentative."

"While these results are very preliminary, they seem to contradict the idea that hedge funds typically employ risky strategies," Berner told the Brookings Institution.

The data comes from newly-required filings submitted by hedge funds now required to register with the Securities and Exchange Commission. That registration was imposed to allow regulators to monitor hedge funds and any risks they might pose to the economy.

The OFR looked at leverage levels, risk modeling and quantity of illiquid assets to reach its "very tentative" conclusion.

The hedge fund lobby leapt at the report, with Managed Funds Association CEO Richard Baker saying it "tracks with MFA's view that hedge funds currently do not pose a systemic risk."

The report comes as hedge funds are groaning under increased compliance costs, caused in part by the registration requirement.


In Depth

AIMA: Smaller Firms Remain the Lifeblood of the Hedge Fund Industry

Jul 26 2017 | 5:55pm ET

It is a hedge fund industry truism that the largest managers receive the most attention...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Rastegar: PE Real Estate Gains Momentum as Uncertainty Rises

Jul 21 2017 | 6:04pm ET

The steady march of equity markets and fundamental shift in the direction of Fed...

 

From the current issue of