Hedge Funds Get EU Watchdog Warning for 18 Times Leverage (1)

Hedge funds active in Europe are running €210 billion ($219 billion) of bets with just €12 billion of client assets, the European Securities and Markets Authority said as it warned about increasing leverage across alternative investments.

“Hedge funds especially continue to be particularly leveraged,” ESMA said in its semi-annual risk report.

ESMA said a group of hedge funds making “substantial” use of leverage now had a total exposure “which represents a multiple of 18.” Substantial use of leverage is defined as those whose borrowings are more than three times assets. The watchdog did not say how many hedge funds were ...