Hedge Funds

AIMA paper says credit hedge funds are not ‘shadow banks’

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Credit hedge funds should not be considered part of the so-called ‘shadow banking’ sector, according to the Alternative Investment Management Association in a new paper.

AIMA’s research highlights crucial differences between the key functions of a traditional bank and those of credit hedge funds and other non-bank financial institutions.

The association points out that credit hedge funds do not take deposits, do not offer daily liquidity nor otherwise hold themselves out as guaranteeing the return of the invested principal.

They manage their liquidity profiles by agreeing investor redemption terms, which correspond to the liquidity profile of the underlying