In a Testimony before the House of Representatives Committee on Financial Services Under Secretary Robert Steel underlined the positive character of hedge funds, but also noted that “the scale, complexity and dynamic nature of these business models and their investment strategies emphasize why we believe heightened vigilance is necessary.”
“Managers are now relying more heavily on the use of leverage, transaction volumes are increasing, and the impact of hedge funds on markets continues to grow”, Mr Steel said. “A concentration of market positions and high leverage may lead to market disruptions and illiquidity if traders simultaneously unwind their positions”, he warned.
Steel announced that the next steps to be undertaken are to ensure that regulators and supervisors, counterparties and creditors, managers of private pools of capital, and pool investors adopt and use the principles and guidelines issued by the PWG.
Full speech
© US Treasury
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