Risk.net: hedge funds push leverage
- Risk.net reported Tuesday that large hedge funds have raised leverage to the highest level since the pandemic, citing fresh Office of Financial Research data. - The Office of Financial Research says leverage is measured as gross assets divided by net assets, with repo borrowing and over-collateralization also tracked. - Regulators are revisiting Form PF reporting as leverage data rise and filing rules shift. (sec.gov)
Large hedge funds have pushed leverage to a post-pandemic high, according to new reporting from Risk.net citing Office of Financial Research data. (risk.net) (financialresearch.gov) In hedge funds, leverage means using borrowed money or derivatives to control a bigger portfolio than the fund’s own capital would allow. The Office of Financial Research measures one key version of that as gross assets divided by net assets. (financialresearch.gov 1) (financialresearch.gov 2) The same monitor tracks repo borrowing, a short-term financing trade in which a fund gets cash and posts securities as collateral. It also tracks over-collateralization, the gap between collateral posted and total borrowing. (financialresearch.gov 1) (financialresearch.gov 2) The Office of Financial Research says high leverage can leave funds dependent on creditors’ willingness to keep lending. If asset prices fall and collateral values drop, funds can face margin calls and may have to sell liquid assets quickly. (financialresearch.gov 1) (financialresearch.gov 2) That matters because hedge funds now sit deeper inside core funding markets than they did a decade ago. The Office of Financial Research says the Hedge Fund Monitor pulls together data from the Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Reserve Board, and Fixed Income Clearing Corporation. (financialresearch.gov) (financialresearch.gov) One of those funding channels is sponsored repo, where a dealer brings a non-dealer client onto the Fixed Income Clearing Corporation platform. The Office of Financial Research says the sponsored member is typically a hedge fund or a money market fund, and that most sponsored repo activity involves a hedge fund borrowing cash against securities. (financialresearch.gov) The official data also show regulators are not just watching positions; they are watching financing terms. The Federal Reserve’s Senior Credit Officer Opinion Survey, which the monitor includes, measures whether dealers report increases or decreases in hedge fund leverage use and credit availability from one quarter to the next. (financialresearch.gov) At the same time, the reporting rules around private funds are moving. The Securities and Exchange Commission and Commodity Futures Trading Commission in September 2025 pushed the compliance date for 2024 Form PF amendments to October 1, 2026. (sec.gov) (federalregister.gov) Then, on April 20, 2026, the two agencies proposed another rewrite of Form PF that would raise the general reporting threshold from $150 million in assets under management to $1 billion, and the large hedge fund adviser threshold from $1.5 billion to $10 billion. (lw.com) That leaves regulators and markets with the same question from two directions: leverage is rising, while the reporting framework meant to map it is still being rewritten. (risk.net) (sec.gov)
