LTCM Founder Says Hedge Fund Firms Pose no Systemic Risk

Hans Huffschmid head of GlobeOps has said that it is impossible for any single hedge fund to pose the type of systemic risk that LTCM did in 1998 or that led to the 2008 financial markets melt down.   Though many Hedge Funds are significantly larger than LTCM now, none pose the risk that required a $3.5 billion bailout then.   Reasons that limited risk are (1) the prevalence of Prime Brokers and their risk monitoring, (2) market regulation, (3)

At one point LTCM was leverageed 100 times.  Average hedge fund leverage in London in 2008 was 1.15 times from 1.9 times in 2007.  Huffschmid also commented that the roots of today’s crisis was in banks and housing capital markets, not the hedge fund industry.   You can find more here, http://www.guardian.co.uk/business/feedarticle/8535671

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