Leverage

BIS, Leverage, Margin, US Treasuries

Key takeaways For a two-week period in mid-March 2020, government bond markets experienced uncharacteristic turbulence, sometimes selling off sharply in risk-off episodes when they would normally attract safe haven flows. Evidence in…

Hazeltree reports hedge fund leverage down from 230% pre-crisis to under 200% in March 2020

March 26, 2020

HazelTree, hedge funds, Leverage

Are we living through another 2008 crisis? Is it a deeper crisis? How long will it last? Are you betting that the safeguards put in place to protect against global…

Bloomberg: Before Fed Acted, Leverage Burned Hedge Funds in Treasury Trade

March 21, 2020

basis trade, Bloomberg, hedge funds, Leverage, Repo

When coronavirus panic kicked off unprecedented turmoil in Treasuries last week, hedge fund leverage was lurking. The firms use borrowed money from the repurchase market for the popular basis trade,…

IOSCO launches framework for monitoring leverage in funds that may pose stability risks

December 13, 2019

The Board of the International Organization of Securities Commissions (IOSCO) today unveiled a two-step framework designed to facilitate monitoring of leverage in investment funds that could potentially pose risks to…

IOSCO seeks feedback on proposed framework for assessing leverage in investment funds

November 14, 2018

The Board of the International Organization of Securities Commissions (IOSCO) is requesting feedback on a proposed framework to help measure leverage used by investment funds which in some circumstances could…

Manmohan Singh’s latest, “Leverage – A Broader View,” shows that build up in the banking system from off-balance sheet trades is huge

Manmohan Singh and Zohair Alam of the IMF have written an important white paper “Leverage—A Broader View” (March 19 2018, IMF Working Paper WP/18/62) that looks at off-balance sheet leverage.…

ESRB makes recommendations to ESMA on liquidity and leverage in funds

February 14, 2018

Anna Reitman

ESMA, ESRB, fund liquidity, Leverage

The European Systemic Risk Board (ESRB) has published a recommendation on action to address systemic risks related to liquidity mismatches and the use of leverage in investment funds. The ESRB…

Bloomberg: $90bn fund shows 8-to-1 leverage as it seeks new money

January 10, 2018

Anna Reitman

asset management, Leverage, Point72, SAC Capital, Steve Cohen

Steve Cohen had about $90 billion of market bets outstanding at the beginning of this year, indicating his Point72 Asset Management was using large amounts of leverage as the firm…

Our analysis of IOSCO’s latest hedge fund survey (Premium)

November 27, 2017

Hedge Funds, IOSCO, Liquidity Management

hedge funds, IOSCO, Leverage, topstory

IOSCO released their 2016 data analysis of hedge fund assets, leverage and liquidity. While this document always feels a bit dated compared to current markets, it also has some kernels…

How important is balance sheet management in prime brokerage today? Look at compensation packages (Premium)

June 27, 2017

Richard Stinchfield

Basel III, Dodd-Frank, Hedge Funds, Prime Brokerage, Regulatory, US

bank capital, Leverage, Prime Brokerage, Regulatory, topstory

In our survey of US prime brokers released today, we looked at the relationship between balance sheet optimization with hedge fund clients and employee compensation. We followed the thinking that…

CFTC Chairman Timothy Massad on measuring hedge fund leverage

October 21, 2016

CFTC, hedge funds, Leverage

Keynote Remarks of Chairman Timothy Massad at the Managed Funds Association Outlook 2016 Conference October 21, 2016 FSOC Asset Management Project Finally, I would also like to say a few…

Comment letters on the SEC's proposed rules for limiting leverage in registered funds (Premium)

April 28, 2016

Derivatives, Investments, Regulatory, SEC, US

18f-4, Leverage, liquid alterantives, mutual funds, sec, Swaps, topstory, VaR

In December 2015, the US Securities and Exchange Commission proposed rule 18f-4 limiting the amount of leverage that registered funds could use. Funds could either use a portfolio limit of…

Changes in hedge fund leverage according to IOSCO

December 15, 2015

Collateral Management, Hedge Funds, IOSCO, Regulatory

hedge funds, IOSCO, Leverage, topstory

IOSCO released their third hedge fund survey last week with some expected results and some new information. Most importantly, we have to get used to their definitions of leverage and…

The FSB takes on fund leverage and liquidity

September 29, 2015

Financial Stability Board, Fixed Income, Investments, Liquidity Management, Risk Management, SEC, Securities Lending, Shadow Banking

Financial Stability Board, FSB, fund management, Leverage, Liquidity, Securities Lending, Shadow Banking, topstory

The Financial Stability Board (FSB) issued a press release outlining what they discussed at their Sept. 25th meeting in London. Leverage and liquidity is still on their mind. Securities lending…

Finadium: Decoding the US Regulatory Agenda on Securities Financing, Collateral and Leverage

July 22, 2015

Collateral Management, Dodd-Frank, Federal Reserve, Regulatory, Repo, SEC, Securities Lending, US

collateral, Finadium, Leverage, Regulation, securities finance, topstory, US

In this report, Finadium reviews the next phases of US financial regulation in securities finance, collateral and leverage as identified by regulators and market participants. The result is a synopsis…

Bloomberg: SEC to test hedge funds on leverage and liquidity

April 23, 2014

Bloomberg, hedge funds, Leverage, Liquidity, sec

Alternative Funds to Get SEC Test for Leverage, Liquidity Alternative mutual funds will be examined by the U.S. Securities and Exchange Commission to assess whether managers are complying with leverage…

IOSCO builds new measurements for hedge fund leverage; this is a work in progress but shows good forward momentum

November 7, 2013

Derivatives, Hedge Funds, Investments, Prime Brokerage, Regulatory, Repo

derivatives, hedge funds, IOSCO, Leverage, prime brokers, Repo

IOSCO has released the results of their second hedge fund survey, capturing data on 1,044 fund managers with US$1.94 trillion in assets. The data on leverage remain difficult to portray…

Tuesday roundup: regulator reports and consultation papers (Finadium clients only)

July 2, 2013

Basel III, CCP, Collateral Management, Regulatory

Bank of England, Basel III, BCBS, CCPs, Leverage

We’ve seen a number of interesting reports from regulators over the last week that we are just now getting to. Here’s a summary of what we found important. Continue reading

Finadium: hedge funds on leverage, repo and prime custody

June 27, 2013

Collateral Management, Hedge Funds, OTC Derivatives Clearing, Prime Brokerage, Repo, Securities Lending

collateral management, Finadium, hedge funds, Leverage, OTC derivatives, prime brokers, Repo, Securities Lending

Finadium has released a new research report, “Hedge Funds on Leverage, Repo and Prime Custody: A Finadium Survey.” The report aims to identify how hedge funds are evolving in their…

An excellent argument for reducing Basel capital rules from a Bank of England paper

September 4, 2012

Basel III, Dodd-Frank, Europe, Regulatory

Bank of England, Basel capital rules, Basel III, Leverage

1

In an excellent new paper, Andrew G Haldane and Vasileios Madouros, two senior Bank of England officials, make the case that less is more in financial regulation, and that the…

Prime brokers vs. custodians as Basel III raises costs for leverage

April 2, 2012

Basel III, Prime Brokerage, Regulatory

Basel III, Leverage, Prime Brokerage, prime brokers

A recent Financial Times article discussed the ongoing negotiations between prime brokers and hedge funds over financing and trading costs. These negotiations have been brought on by Basel III requirements…

From the ERC a new paper, "Haircuts and initial margins in the repo market"

February 8, 2012

Collateral Management, Re-Hypothecation, Regulatory, Repo, Systemic Risk, Tri-Party Repo, Wrong Way Risk

CCP, European Repo Council, ICMA, Lehman, Leverage, Repo

The European Repo Council, part of ICMA, came out with an interesting paper today, “Haircuts and initial margins in the repo market”. It was authored by Richard Comotto, Senior Visiting Fellow…

And now Forbes piles on Re-Hypothecation

January 6, 2012

Prime Brokerage, Re-Hypothecation, Repo, Securities Lending

Finadium, Leverage, Repo, Securities Lending, Shadow Banking

Here we go again. A December 30, 2011 article in Forbes by Robert Lenzner “The $18 Trillion Threat Of The Unregulated Shadow Banking System” savages re-hypothecation. Lenzner writes, “…Does this sound…

Now everyone is a repo trader

As our first post of the year, it is appropriate to come back to one of our common threads: collateral. The WSJ article from Dec. 29, 2011 “Europe’s Banks Face…

FT Alphaville: One man’s haircut is another man’s unsecured risk

November 28, 2011

CCP, Collateral Management, Derivatives, Repo, Securities Lending

CCP, Lehman, Leverage, Liquidity, Repo, Securities Lending

In a November 25, 2011 post in FT Alphaville, Izabella Kaminska points out that there is a flip-side to the collateral conundrum: excessive over-collateralization. The post notes that according to Richard Comotto,…

How was MF Global able to leverage themselves so much? The answer lies in the repo market.

November 3, 2011

Collateral Management, Liquidity Management, Regulatory, Repo

Europe, Leverage, MF Global, Repo

One wonders exactly how MF Global was able to leverage themselves so much. Their June financials showed $44.4 billion of assets vs. $1.4 billion of equity, a ratio of just…

Bond Traders Left Adrift as Dealers Reduce Risk: Credit Markets

October 6, 2011

Liquidity Management, Repo, Securities Lending, Tri-Party Repo

Basel III, Credit Markets, Leverage, Liquidity Coverage Ratio, Repo

Volatility in the markets certainly contributes to the pullback in trading of corporate bond and other “story paper”. We wonder if the changes in the tri-party market, preparation for the…

"Margin Call", the movie is coming in October! Popcorn anyone?

September 9, 2011

Collateral Management, Liquidity Management, Repo, Securities Lending

Leverage, Margin, Securities Lending, Short selling