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Vincent Deluard From Kirsten Bischoff, Opalesque New York:

With several reports indicating that hedge fund leverage remains low, research by Bank of America Merrill Lynch shows that leverage is slowly creeping back upwards within the industry.

A hedge fund research report by the firm showed that January saw an increase of 4.7% industry-wide (measured by NYSE Margin Debt), which brought the year-over-year increase to +23.9%. Hedge fund leverage is now at 289.6bn (peak leverage was $381bn).

A recent survey by TrimTabs/BarclayHedge (February) showed that 18% of hedge fund managers aimed to increase leverage in the near term, and 15% planned to lever down. Managers aim to lever up even though they are bearish on both bonds and stocks,” notes Vincent Deluard, Executive Vice President at TrimTabs. “Why? They still have a large incentive to gamble with borrowed money because short rates round to nil. If one of the Fed’s goals was to ignite speculation and greed then it has succeeded famously.”

However, in an article in the Financial Times this week primer brokers commented to the publication that hedge fund leverage remains much lower than what is available for hedge fund managers to take advantage of. European Prime Brokerage Head at Credit Suisse Dougal Brech said that his firm is seeing managers use leverage in very specific ways because financing for less liquid strategies has grown more expensive since 2008. And, Barry Bausano, co-head of prime finance at Deutsche Bank......................

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