Hedge Funds

Leverage risk still very low, says JP Morgan


A JPMorgan research report published this week concludes that hedge fund managers are taking “remarkably” little risk in terms of leverage. Indeed, according to the paper, hedge fund leverage dropped sharply in the second half of 2000 and through 2001, and has barely moved upwards again ever since.

The reason for today’s relatively low leverage, suggested authors Jan Loeys and Nikolaos Panigirtzoglou, could be that hedge fund managers see fewer trading opportunities. Alternatively, they said, it could reflect “a business strategy that focuses more on capital gathering and their 2% management fees.” Finally, hedge funds could be minimizing downside risk to meet