(April 8, 2013) - Derivatives brokers have seen greater desire for risk and leverage from many of their hedge fund clients, according to a quarterly survey conducted by the Federal Reserve's board of governors.
The poll asked senior credit officers to assess how the overall appetites of their hedge fund clients for investment risk has changed since the beginning of 2013. Respondents reported that of their closest managers, risk pursuit had "increased somewhat" for 50%. The remainder had stayed consistent, except for 4.5% which had "decreased somewhat."
Derivatives dealers reported similar changes in risk appetite among their more casual hedge fund clientele: 32% increased somewhat, 59% were unchanged, which 9% showed a slight decrease.
The Federal Reserve commented in the report that hedge funds were also seeking out greater leverage-unlike most of the dealers' others clients (mutual funds, pension plans, endowments, insurance companies etc.).
"Overall, respondents noted that the use of financial leverage by most classes of counterparties had remained basically unchanged over the past three months," the report said. "However, more than one-fourth of dealers, on net, reported an increase in the use of leverage by hedge funds."
For the full results of the survey, click here.
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