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Keywords:hedge funds OR Hedge funds OR Hedge Funds 

Journal Article
Gov. Warsh: marketplace best discipline for hedge funds

Federal Reserve Gov. Kevin Warsh recently told Congress that while hedge funds present risk management challenges, the market provides necessary discipline. He added that the Fed and other agencies are monitoring institutions' exposure to risk.
Financial Update , Volume 20 , Issue 3

Journal Article
Statement to Congress, April 11, 2000 (hedge funds and over-the-counter derivatives)

Federal Reserve Bulletin , Issue Jun

Working Paper
The costs and benefits of moral suasion: evidence from the rescue of Long-Term Capital Management

This study examines the level of unsecured borrowing done by the firms that would ultimately rescue Long-Term Capital Management in the days leading up to the hedge fund's rescue. Although there is some evidence that these banks borrowed less at the height of the crisis, further examination reveals that this reduction in borrowing was demand-driven and did not result from rationing on the part of the market. This suggests that the market believed that the troubles at LTCM would not have solvency-threatening repercussions for the fund's major creditors. Further, it is shown that large banks ...
Working Paper Series , Paper WP-02-11

Journal Article
Statement to Congress, March 24, 1999 (hedge funds and leveraged institutions)

Federal Reserve Bulletin , Issue May

Working Paper
Investor Concentration, Flows, and Cash Holdings : Evidence from Hedge Funds

We show that when only a few investors own a substantial portion of a hedge fund's net asset value, flow volatility increases because investors' exogenous, idiosyncratic liquidity shocks are not diversified away. Using confidential regulatory filings, we confirm that high investor concentration hedge funds experience more volatile flows. These hedge funds hold more cash and liquid assets, which help absorb large, unexpected outflows. Such funds have to pay a liquidity premium and generate lower risk-adjusted returns. Investor concentration does not affect flow-performance sensitivity. These ...
Finance and Economics Discussion Series , Paper 2017-121

Working Paper
Flights to Safety

Using only daily data on bond and stock returns, we identify and characterize flight to safety (FTS) episodes for 23 countries. On average, FTS days comprise less than 3% of the sample, and bond returns exceed equity returns by 2.5 to 4%. The majority of FTS events are country-specific not global. FTS episodes coincide with increases in the VIX and the Ted spread, decreases in consumer sentiment indicators and appreciations of the Yen, Swiss franc, and US dollar. The financial, basic materials and industrial industries under-perform in FTS episodes, but the telecom industry outperforms. Money ...
Finance and Economics Discussion Series , Paper 2014-46

Working Paper
Liquidity risk and hedge fund ownership

Using a unique, hand-collected data set of hedge fund ownership, we examine the effects of hedge fund ownership on liquidity risk in the cross-section of stocks. After controlling for institutional preferences for stock characteristics, we find that stocks held by hedge funds as marginal investors are more sensitive to changes in aggregate liquidity than comparable stocks held by other types of institutions or by individuals. Stocks held by hedge funds also experience significantly negative abnormal returns during liquidity crises. These findings support the theory of Brunnermeier and ...
Finance and Economics Discussion Series , Paper 2011-49

Working Paper
Hedge Fund Treasury Trading and Funding Fragility: Evidence from the COVID-19 Crisis

Hedge fund gross U.S. Treasury (UST) exposures doubled from 2018 to February 2020 to $2.4 trillion, primarily driven by relative value arbitrage trading and supported by corresponding increases in repo borrowing. In March 2020, amid unprecedented UST market turmoil, the average UST trading hedge fund had a return of -7% and reduced its UST exposure by close to 20%, despite relatively unchanged bilateral repo volumes and haircuts. Analyzing hedge fund-creditor borrowing data, we find the large, more regulated dealers provided disproportionately more funding during the crisis than other ...
Finance and Economics Discussion Series , Paper 2021-038

Journal Article
Statement to Congress, May 6, 1999 (hedge funds, leverage and the lessons of Long-Term Capital Management)

Federal Reserve Bulletin , Issue Jul , Pages 477-479

Discussion Paper
How Has Post-Crisis Banking Regulation Affected Hedge Funds and Prime Brokers?

“Arbitrageurs” such as hedge funds play a key role in the efficiency of financial markets. They compare closely related assets, then buy the relatively cheap one and sell the relatively expensive one, thereby driving the prices of the assets closer together. For executing trades and other services, hedge funds rely on prime brokers and broker-dealers. In a previous Liberty Street Economics blog post, we argued that post-crisis changes to regulation and market structure have increased the costs of arbitrage activity, potentially contributing to the persistent deviations in the prices of ...
Liberty Street Economics , Paper 20201019


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