The amount of borrowed money at big hedge funds is ringing alarm bells with Wall Street’s uber regulator, which made a new push to try to assess whether the $2.9tril industry could threaten the financial system.
The new group will focus on analyzing data and studying risk factors such as counterparty exposures and trading strategies, said the council, whose members include the heads of the U.S. Treasury Department, the Federal Reserve and the Securities and Exchange Commission.
“There appears to be a concentration of leverage in a small number of large hedge funds,” the FSOC concluded in a lengthy examination of asset managers. The group’s members approved a report that calls for closer scrutiny of hedge funds, even as Treasury Secretary Jacob Lew said at the meeting that concentrated borrowing doesn’t necessarily mean big funds are overly risky.
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