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From Kirsten Bischoff, Opalesque New York:

As it turns out, regulation is not the biggest fear for hedge fund managers. Volatility and counterparty risk are the biggest concerns according to the preliminary results of the Risk Governance Survey performed by PRIMA and Capital Market Risk Advisors.

The survey, which included 140 participants from 27 countries (the majority of which were US-based) focused on what managers biggest concerns were for the back half of 2009. The survey showed that across the financial industry, regulatory risk is very much a major concern. However, a smaller focus on hedge fund and fund of funds respondents shows that the greater concern lies with the all too real and familiar pains of 2008, which were counterparty risk and volatility.

Prior to 2008, counterparty risk was not very high on the list of concerns for hedge fund managers. Survey’s such as Global Custodian Magazine’s Prime Brokerage Rankings did not even include counterparty risk as a measured category in 2008. However, the fallout from Bear Stearns and Lehman Brothers has remained a focus for many hedge funds. Nine months later, there are still funds that were counterparties to Lehman Brothers that have yet to recover monies the firm was in possession of upon bankruptcy. Opalesque has even spoken to firms that, as of two months ago were holding in special accounts monies still needing to be returned to Lehman Brothers.......................

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