Mon, Jul 6, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

AIMA: FSB take note, credit hedge funds are not shadow banks

Friday, March 02, 2012
Opalesque Industry Update - Credit hedge funds should not be considered part of the ‘shadow banking’ sector, according to a new paper by the Alternative Investment Management Association (AIMA), the global hedge fund trade association.

AIMA’s research paper* highlights crucial differences between the key functions of a traditional bank and those of credit hedge funds and other non-bank financial institutions.

Credit hedge funds do not take deposits, do not offer daily liquidity nor otherwise hold themselves out as guaranteeing the return of the invested principal.

They manage their liquidity profiles by agreeing investor redemption terms which correspond to the liquidity profile of the underlying investments. They therefore do not engage in significant maturity transformation.

Crucially, hedge funds do not benefit from implicit or explicit taxpayer guarantees.

Andrew Baker, AIMA CEO, said: “Credit hedge funds – and hedge funds in general - do not operate in the shadows. Managers are extensively regulated, are subject to reporting requirements and do not engage in any significant sense in credit, liquidity or maturity transformation, so their activity is not ‘bank-like’. Credit hedge funds do not belong in the same category as banks, let alone ‘shadow banks’.”

The G20 mandated the Financial Stability Board (FSB) to develop recommendations to strengthen the oversight and regulation of the ‘shadow banking’ system in November 2010, but there has been considerable debate about what constitutes a ‘shadow bank’. Recent G20 language referred to 'money markets funds, securitization, securities lending and repo activities, and other shadow banking entities. '

Credit and credit-related hedge funds comprise up to one-third of the global hedge fund industry and use a very diverse range of investment strategies, ranging from fundamental credit analysis and arbitrage to the trading of complex derivatives.

* The Role of Credit Hedge Funds in the Financial System: Asset Managers, Not Shadow Banks
Download here: Source

(press release)

As the global hedge fund association, the Alternative Investment Management Association (AIMA) has over 1,300 corporate members (with over 6,000 individual contacts) worldwide, based in over 40 countries. www.aima.org

BG

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: New systematic strategy managed alongside research firm outperforms S&P500[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: An emerging CTA manager explains how he runs his strategy, which is based on an index produced by a research firm. Peter Turk is head of

  2. Opalesque Exclusive: New systematic strategy embraces machine learning[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The founder of a New York-based systematic trading firm, which offers a hybrid between alpha strategies and alternative feta at lower fees, describes his approa

  3. Larry Robbins' hedge fund Glenview buys 1m Tenet Healthcare shares[more]

    Komfie Manalo, Opalesque Asia: Glenview Capital Management said it bought an additional 979,482 shares at Tenet Healthcare Corp valued at $53.80 million, raising its stakes in the healthcare services company to 15.16%, reported

  4. Legal - Grayson’s hedge funds under scrutiny for possible ethics violations, Court rejects hedge fund’s motion to block merger of Samsung affiliates[more]

    Grayson’s hedge funds under scrutiny for possible ethics violations From Freebeacon.com: Rep. Alan Grayson is finding himself in hot water over managing hedge funds that bear his name, actions that are in possible violation of House ethics rules. Sitting members of Congress are prohibite

  5. Hedge funds decline in June as stocks tumble on Greek woes[more]

    From Bloomberg.com: Hedge funds posted losses across strategies last month as uncertainty over whether Greece will remain in the euro sent global stock markets tumbling. Winton Capital Management declined about 3.1 percent in June in its $12.1 billion Winton Futures Fund, leaving it down 1.9 percent

 

banner