Tuesday, July 05, 2005

Another LTCM in the making ?

... hedge funds have again started to move into risky territory, employing high amounts of leverage. But a more worrying point, they are now principal participants in major financial markets. Any instability could potentially threaten the system.

Recent article in the NYTimes: Could a Few Hedge Funds Spoil the Party?. (free regn. reqd.)

"...The crowding effect is visible in some markets, particularly fixed income and convertible arbitrage, which hedge funds have come to dominate. In May, in its latest report on global financial security, the International Monetary Fund found that hedge funds might account for 80 to 90 percent of all participants in those markets."
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