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July 11, 2005
Banks increase exposure to Hedge Funds
There has been a dramatic increase in the assets managed by hedge funds. The banking industry has also increased its exposure to the funds. This observation was made by Standard and Poors’s recently. Bank for International Settlements in Basel Switzerland also displayed concern on the trend last week. BIS mentioned that due to the rapid growth of assets under management and escalating competition it is prudent to play safe and not to invest aggressively in the funds. All this coupled with the fact that the Hedge Fund industry is not very transparent right now, makes is prone to risk. The recent downfall of the Connecticut, based hedge fund manager, Long Term Capital Management bears witness to this. But several industry analysts feel that a lot has changed since LTCM disaster and numerous checks have been placed to avert such an incident in the future. Hedgeco.com reports:
“According to BIS, while altogether banks had strengthened controls around hedge funds, however their exposure levels to Hedge investment portfolios were on the rise.”
Read More: Rapid Growth of Hedge Funds increases financial market risks-S&P
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