The FSA has published its latest report (see e.g. Regulatory Roundup 33 for details of the 2011 report) following the results of the Hedge Fund Survey (HFS) and Hedge Fund as Counterparty Survey (HFACS) conducted in March and April of this year respectively.
The surveys are conducted every six months to assess the systemic risk posed by hedge funds. Although, as the report acknowledges, hedge funds did not play a major role in the financial crisis it is felt that they have the potential to pose systemic risks to financial stability if they are very large or leveraged.
Key findings include: an increase in AuM through a mixture of positive returns and positive net subscriptions; leverage remains largely unchanged and modest for most funds; and, in aggregate, hedge funds report that they are able to liquidate their assets in a shorter timeframe than the period after which their liabilities would fall due.
The report should be viewed as a snapshot given that the HFS is voluntary, with the sample (around 50 FSA-authorised investment managers participated) being selected by the FSA. Similarly the HFACS, (14 FSA-authorised banks and branches participated), is based upon each participant’s top 20 hedge fund credit exposures so all the data collected cover global exposures to the hedge fund industry.
The HFS will be repeated in September and the HFACS in October.
