Systemic hedge fund risks real, says S&P

Fears of another Long Term Capital Management situation – the hedge fund which collapsed in 1998 creating global shockwaves – is overblown, S&P argues. This is because hedge funds requiring cash to meet redemptions have already obtained the funds to do so without causing market disruptions. That said, S&P also states “unexpected events will occur periodically and may have a greater effect on capital markets in future”. ”Although hedge funds provide liquidity and facilitate risk transfer in the global capital markets, a sudden liquidation of leveraged positions due to margin calls c...