Multi-Manager Hedge Funds Pose Risks, BOE’s Bailey Says (1)

The rise of multi-manager hedge funds poses a threat to financial stability, according to Bank of England Governor Andrew Bailey.

Bailey said there are signs of correlated activity, which combined with often ruthless risk-management policies could see these funds rush to the exits during market shocks.

Multi-manager funds, also known as multistrats or pod shops, have taken the lion’s share of investment flows in hedge funds in recent years. That’s with the promise of steady and diversified returns from traders organized into distinct strategies, or pods.

“Multi-manager funds can make individual ‘pods’ deleverage rapidly in stress conditions, which can ...