Hedge Fund Monitor
Leverage
Leverage measures the extent to which hedge funds borrow to enhance returns. While leverage provides benefits, it also comes with risk. Leveraged hedge funds are dependent on creditors’ willingness and ability to continue to lend. Further, declines in collateral and asset values can lead to margin calls that require hedge funds to tap their liquid assets and may leave them less able to meet short-term funding needs. As a result, elevated leverage combined with a reliance on short-term funding warrant closer inspection. Rapid growth in leverage also warrants additional analysis. Examples of leverage metrics include total borrowing, the ratio of gross assets-to-net assets, and the over-collateralization rate.
Collateral posted by type (U.S. dollars)
Skip the ChartThe data are aggregated responses to SEC Form PF. Blank or null values are intentional to avoid potential disclosure of proprietary information of individual filers. Only responses from Qualifying Hedge Funds are included. See additional definitions and methodology on the SEC Form PF Data Sets page of the Hedge Fund Monitor.
Collateral posted by hedge funds is based on SEC Form PF question 43. The three types of collateral captured in question 43 are cash, securities, and other. Cash collateral, as defined in SEC Form PF, includes cash, cash equivalents, and U.S. Treasury and agency securities. Other collateral includes the face value of letters of credit and similar third-party credit support. Hedge funds post securities collateral when they want to borrow cash, and they post cash collateral when they want to borrow securities.
Series Used
Related Charts
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Suggested CitationOffice of Financial Research, "Hedge Fund Monitor," refreshed monthly, https://www.financialresearch.gov/hedge-fund-monitor/ (accessed ).