Global Hedge Fund Industry Hits $3.2tr

• Global Hedge Fund Industry Hits $3.2tr

A survey conducted by the International Organisation of Securities Commissions (IOSCO) has indicated that the global assets under management (AUM) of hedge funds have increased over the past two years by 24 per cent to $3.2 trillion.

IOSCO is global body of securities regulators and its members regulate more than 95 per cent of the world’s securities markets in more than 115 jurisdictions. Nigeria is a member of both the board of IOSCO and its influential Committee on Retail Investors, otherwise known as Committee 8

The board of IOSCO published the Report on the Fourth IOSCO Hedge Fund Survey, which provides regulators with new insights into the global hedge fund industry and the potential systemic risks this industry may pose to the international financial system.

IOSCO´s biannual survey has become an important resource for regulators, given the lack of public and global data on hedge fund activities.

The survey facilitates the regular collection and analysis of hedge fund data, enabling regulators to share information and observe trends regarding trading activities, leverage, liquidity management, markets and funding in the global hedge fund sector.

The report explains the results of the fourth IOSCO survey and provides an overview of the hedge fund industry based on data as at September 30, 2016. Since the first survey was conducted in 2010, data collection has expanded due to enhanced regulatory reporting regimes in some jurisdictions and fewer legal constraints around the use and sharing of data.

IOSCO however noted that while the increase to $3.2 trillion may reflect a combination of more widespread reporting across jurisdictions, market performance, and net fund subscriptions, it is not conclusive from the data.

The latest survey also indicated that the Cayman Islands continues to be the fund domicile of choice, making up 53 per cent of the global total by net asset value, largely unchanged from previous years.

According to the data from the Survey, equity long and short was the most widely used investment strategy, followed by global macro and fixed income arbitrage.

Also, gross leverage of the hedge funds in the survey was 7.1 times of net asset value, which includes the notional values of interest rate and foreign exchange derivative contracts. Removing notional values of interest rate and foreign exchange derivatives contracts reduce the gross leverage was 3.1 times and net leverage was 1.1 times.

The report indicated that 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.

As of the measurement date, 3.8 per cent of hedge fund assets had constrained redemptions through the use of liquidity management tools, such as gates, suspensions, or side pockets.