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From the Opalesque team:

Hedge fund managers have remained wary of the rallying markets throughout the second half of 2009, taking losses in order to close out gains made during the year. But worries about counterparty risk have dropped off immensely in comparison to last year (although according to CDR Counterparty Credit Risk Index the Dubai debt crisis has caused a slight spike in concern again).

“Has the situation really changed a lot?” Peter Fletcher asked during the recent Opalesque Roundtable (Geneva). Fletcher, who is Managing Director of the Parly Family Office and has invested in hedge funds and private equity for 20 years, recalled the global instability during the winter of 2008 when he would wake up at 3:30am to monitor how Asia was doing on a day-to-day basis.

“There is still a lot of risk out in the market with counterparties, derivatives and some other instruments and this worries me more than what hedge fund should I pick and what prime broker.”

Governments slowly addressing systemic bank risk On Wednesday the US House Financial Services Committee pushed forward a bill that would create a new council of regulators with the responsibility of winding down large institutions determined “too big to fail”. The bill will be combined with others (including those touching on hedge fund regulation) where it will be debated next week on the House ......................

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