Hedge Fund Leverage Increases
Hedge Funds Leverage Increases, Risk Appetite Low
The September edition of the survey found hedge funds had raised their gearing levels from 1.16 in August to 1.39, the highest level since March 2008. However average cash balances rose marginally to 4% from 3.8% in August and more respondents were overweight cash in September compared to the previous month as risk aversion increased.
Hedge funds also raised their weighted net long exposure during the moth, from 22% to 26%. However this remains well down from the December 2009 peak of 35%.
BAML Global Research European equity strategy head Gary Baker said the survey could not give any possible reasons for the increase in hedge fund leverage. He suggested hedge fund managers could be trying to recoup recent poor performance or were buying bonds, necessitating an increase in gearing. Source