23 November 2017
Reporter: Drew Nicol

Hedge funds continue 2017 run

Global assets under management (AUM) of hedge funds rose 24 percent to $3.2 trillion in the past two years, according to data captured by the International Organization of Securities Commission’s (IOSCO’s) latest market survey.

IOSCO’s biannual survey is aimed at offering regulators new insights into the murky world of the global hedge fund industry and highlight the potential systemic risks this industry may pose to the international financial system.

According to IOSCO the reported rise in assets may reflect a combination of more widespread reporting across jurisdictions, market performance, and net fund subscriptions.

The commission said its survey has become an important resource for regulators, given the lack of public and global data on hedge fund activities.

The survey revealed that equity long/short was the most widely used investment strategy, followed by global macro and fixed income arbitrage.

At an aggregate level, there is a considerable liquidity buffer, suggesting that in normal market conditions, hedge funds should be able to meet investor redemptions.

IOSCO highlighted the role of the Alternative Investment Fund Managers Directive in shining a light on the activities of the hedge fund market.

The commission was candid in the limitations of its survey, noting that because this methodology may skew the geographic distribution of fund manager location somewhat towards the US and under-represent other countries, it is avoided showing a detailed breakdown of funds per jurisdiction of manager as has been shown in the survey’s previous iterations.

Data around UCITS is also limited as some European countries included data only from funds recorded in AIFMD.

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