Does the use of multiple prime brokers boost risk?

This is a bunch of BULL. There has been very little, if any, increase of transparency of hedge funds over the last decade. On the contrary, hedge fund insurance has become a new trend because of the billions of dollars of money fraudently stolen from investors over the last decade. Just as Federal regulators and the Treasury Dept turned a blind eye to fraud in the mortgage and downstream securities businesses, the same lack of regulation in the hedge fund business still exists. It's been required to keep money flowing into the pyramid scheme which propped up the housing market and has been propping up hedge funds as well and only God knows how much of the US if not the world economy. Ordinary investors and the public in general ends up paying the price for this folly so that the few at the top of the pyramid can take the money and run.

Would you keep all your money in one bank (including investments)?
Would you keep all your money in one asset class?
Would you watch TV over 1 channel only?

Hedge Funds use on average at least 3 prime brokers to clear, confirm and process the same fund. This entails that the prime brokers do not have full visibility about their clients' credit, counterparties exposures. It makes it hard to also see all hedges netted and grossed out with each other from the institutional side. Only hedge funds have to reconcile these exposures at their levels, and given their infrastructures, they don't thoroughly. Institutionals are heavily exposed to them, they have endorsed their risks without knowing them and now the Federal Reserve is injecting 15 billion USD a day to institutionals just to keep prime brokers afloat from further failures, after Bear Stearns. It all comes down to making insurance way too easy for people who are way too greedy and who wants to benefit from all sides of the deal all along. I won't make it that easy on them by telling investors about what really is risk management on the street !