Hedge Funds Might Escape Systemic Designation

May 19 2014 | 4:15pm ET

Hedge fund may avoid the dreaded designation "systemically important," after all.

A U.S. Treasury official said today that there has been "a bit of an overreaction" on the part of the asset management industry to the prospect of such a designation, which would place a firm under Federal Reserve oversight. Mary Miller told Bloomberg Television that it is "certainly an option" that no asset management firm will be found systemically important.

"We have to determine are there risks, and if there is a determination that there are risks, then you have to think about what are the remedies," she said. "Is it presented by an individual firm, by the industry as a whole, or perhaps by certain activities that asset managers engage in."

Power to designate firms lies with the Financial Stability Oversight Council, which held a public conference today featuring Citadel Investment Group's Kenneth Griffin. Miller said she hopes that the confab will "clear up a little bit of that misunderstanding."

Despite industry fears, "there is no pre-determined outcome," Miller insisted. "No judgments have been made."


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