Developments in the Hedge Fund Industry

February 4, 2005
Swiss Finance Conference 2005, Zurich

Summary

Hedge funds have been an important source of innovation in the asset management industry. They have rendered financial markets more liquid, more efficient and more flexible. Nonetheless, market observation suggests that certain segments of the hedge fund industry can have some impact on market volatility, either by accentuating existing market trends or by causing sharp price reversals or gapping price movements.

The use of leverage is a central characteristic of the hedge fund industry. Overall industry leverage is extremely difficult to measure. Ultimately, leverage combined with inept asset management strategies leads to hedge fund failures. As such, these failures should be of no concern to policy makers, as long as they do not undermine the stability of the financial system. A prudent and disciplined risk management in the global investment banks provide the most reliable defense against an erosion of lending standards and the potentially hazardous consequences of the use of excessive leverage in the hedge fund industry.

Download file now

The file can be downloaded with the button below.

Additional files

Related content

Author(s)

  • Philipp Hildebrand
    Member of the Governing Board

Your settings

Required: These cookies (e.g. for storing your IP address) cannot be rejected as they are necessary to ensure the operation of the website. These data are not evaluated further.
Analytics: If you consent to this category, data such as IP address, location, device information, browser version and site visitor behaviour will be collected. These data are evaluated for the SNB's internal purposes and are kept for two years.
Third-party: If you consent to this category, third-party services (used, for example, to add social multimedia content to the SNB's website) will be activated which collect personal data, process these data, disclose them abroad - worldwide - and place cookies. The relevant data protection regulations are linked in the 'Privacy statement for the website of the Swiss National Bank'.

Choose your preferred settings:

This website uses cookies, analytics tools and other technologies to provide requested features, content and services, to personalise the content shown, to provide links to social media, and to analyse the use of the website in anonymised form for the purposes of improving usability. Personal data are also disclosed abroad - worldwide - to video service providers and the analytics tools of these providers are used. More information is available under 'Manage settings'.