Does the use of multiple prime brokers boost risk?

Although most hedge funds use more than one prime broker, the question remains: Does this pose any problems for investors? The Financial Times reports that the GAO is concerned that when information is held by several service providers, and not readily shared, it makes it harder to assess the amount of leverage used by a single fund. Even if this information were available, it would be hard to decipher. The study also found, however, that hedge funds have seen an increase transparency and instituted higher standards since the LTCM meltdown in 1998.  

For more: 
- here's the Financial Times article

Read more on: hedge funds | investments | long term capital management

Post a comment