AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

Low Levels of Leverage in Global Hedge Fund Industry

21 April 2009

The world’s hedge fund industry has historically low levels of leverage, and the idea of the industry as highly-leveraged is a misconception. That is according to the Alternative Investment Management Association (“AIMA”), the international trade body for the hedge fund industry.

AIMA cited the most recent figures from the European Central Bank and the UK regulator the FSA, both showing that leverage levels of hedge funds are in the region of 1 times net assets. The recent Turner Review in the UK pointed out that hedge fund leverage is “typically well below that of banks”. Andrew Baker, CEO of AIMA, commented, “These figures, which are historically low, are typical of the industry worldwide and are much lower than leverage levels in the banks. In fact the Turner Review reported that leverage levels in the banks were in the order of 30 to 50 times.”

Andrew Baker added, “Some policy makers mistakenly base their demand for regulatory reform of the world’s hedge fund industry on the idea that it is highly-leveraged, but as the recent figures from the ECB and the FSA show, it’s a complete myth.”

AIMA also underlined the relative size of the global hedge fund industry compared to the banking sector. HedgeFund Intelligence suggests that global assets under management by the hedge fund industry were just over $1.8 trillion at the end of 2008.  Andrew Baker concluded, “In the overall scheme of things, the world’s hedge fund industry is dwarfed by the banks. There are some individual banks that have bigger balance sheets than the entire global hedge fund industry. And of course as these figures demonstrate leverage levels are also much lower in the hedge fund industry than in the banks. We at AIMA hope that international policy makers will keep a sense of perspective when it comes to establishing the future regulatory framework for the industry.”

- Ends -

For media enquiries, please contact Christen Thomson, AIMA Director of Communications, on +44 (0)2078228380; email – cthomson@aima.org


Editors’ Notes:

Sources

  • Leverage levels of hedge funds
    • European Central Bank’s Financial Stability Review, December 2008
    • Financial Services Authority’s survey, October 2008
  • Leverage levels of banks
    • Turner Review, March 2009
    • UBS Global Asset Management A&Q Industry Research, Hedge Fund Industry Update, February 2009
    • Bank of England Financial Stability Report, October 2008
    • Houman B. Shadab (Mercatus Center at George Mason University) – Testimony before the House Committee on Oversight and Government Reform, November 2008
  • Assets under management
    • HedgeFund Intelligence, December 2008


About AIMA
As the only truly representative global hedge fund association, AIMA, the Alternative Investment Management Association, has more than 1,100 corporate members worldwide, based in 40 countries.

Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms and fund administrators.  They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.

AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.

 


 

 
 
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