Best practices in monitoring systemic risks arising from hedge funds
___PPTMAC11
IMF-FSB Users Conference on the Financial Crisis
and Information gaps
John Fell
Washington, D.C., 9 July 2009
Outline
Two approaches to monitor hedge fund-related risks to financial stability
Currently available information sources:
quantitative (statistical) data and other information
official ECB statistics on hedge funds
Wish-list suggestions
Concluding remarks
Analysis of risks to financial stability
Two possible complementary approaches:
Adverse impact on creditor banks (including direct and indirect risks) and financial markets. Analysis from banks' and financial markets' functioning perspective

Focus on risks faced by hedge funds themselves as non-bank financial institutions with a specific set of risks. This facilitates the assessment of potential implications for banks and financial markets
Scope of monitoring: large hedge funds and their management firms
Endogenous vulnerabilities of hedge funds …
Risks faced by hedge funds
investment risk
funding liquidity risk
{leverage}
gross
assets
net
assets
funding
Hedge fund
Stability of bank funding
Investor redemptions
Funding liquidity risk
Market risk x Leverage
… and implications for the financial system
gross
assets
net
assets
funding
Hedge fund

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