The International Organisation of Securities Commissions today published a Report on the Third IOSCO Hedge Fund Survey that looks at efforts by regulators to better understand the hedge fund industry.
The aim of the IOSCO survey is to gather data from hedge fund managers and advisers about the markets in which they operate, their trading activities, leverage, funding and counterparty information. It forms part of IOSCO’s efforts to support the G20 initiative to mitigate risk associated with hedge funds. The report explains the results of the third IOSCO survey and provides an overview of the hedge fund industry as of 30th September 2014.
The IOSCO Hedge Fund Survey remains the only global view on hedge funds from a regulatory perspective and is therefore of key interest to the wider global debate on related issues.
The aim of the IOSCO survey is to gather data from hedge fund managers and advisers about the markets in which they operate, their trading activities, leverage, funding and counterparty information. It forms part of IOSCO’s efforts to support the G20 initiative to mitigate risk associated with hedge funds. The report explains the results of the third IOSCO survey and provides an overview of the hedge fund industry as of 30th September 2014.
The IOSCO Hedge Fund Survey remains the only global view on hedge funds from a regulatory perspective and is therefore of key interest to the wider global debate on related issues.
The report highlights the following observations:
- the Survey captured data from 1,486 qualifying funds, an increase of 42% from the 1,044 funds that participated in the September 2012 survey.
- hedge fund assets under management were USD 2.6 trillion, up 34% from the last Survey. Most of this growth can be attributed to changes in asset values, net inflows and fund structures. Some of this growth also reflects more widespread and accurate reporting across participating jurisdictions;
- the hedge fund industry is largely concentrated in the United State of America, whilst the Cayman Islands continue to be the tax domicile of choice;
- hedge funds remain mostly US dollar based and predominantly invested in North American assets;
- the use of equity-based strategies remains the most popular amongst hedge funds;
- financial leverage is used by hedge funds across all jurisdictions, except in Japan; comparisons of synthetic and gross leverage continue to be hampered by the different leverage metrics used by jurisdictions;
- reported data suggests there is no significant liquidity mismatch in hedge funds; however, this is against the backdrop of “normal” market conditions; and
- hedge funds seem aware of the market liquidity of their portfolio positions, and they can generally make use of suspensions and gating to manage investor redemptions.
Future steps:
IOSCO, through its policy Committee C5 on Investment Management, will continue to discuss how the survey can be further improved to enhance regulators’ understanding of hedge fund activities and their risks. It will in particular consider the consistency and appropriateness of the data and metric definitions used for the elaboration of this survey, taking into account the evolution of regulatory regimes within the Committee and the type of information available. IOSCO will aim to continue to conduct this survey on a periodic basis.
The full report can be found here.