September 14, 2006

Hedge fund Trading of Bonds, Derivatives Doubled

Hedge fund trading of bonds and derivatives in the United States more than doubled in the past year. It has given the funds so much influence that some markets can't operate efficiently without them. Hedge funds accounted for 45 percent of annual trading in emerging market bonds and 47 percent of distressed debt. They also accounted for 55 percent of credit derivatives in the past 12 months.

In the same period, overall trading in bonds and derivatives rose 25 percent. Hedge funds have encouraged brokers to develop new products, such as collateralized debt obligations or securities backed by pools of loans or bonds.

Read my previous post titled "Key Hedge Funds Strategies" to know about important hedge fund strategies.

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