Recall that the Financial Stability Oversight Council--a child of Dodd-Frank--was tasked with determining which nonbank financial companies posed a systemic financial risk and should therefore be subject to additional oversight. It has fallen behind somewhat on its mission, as have many initiatives set forth in the massive financial reform bill.

The council had originally hoped to have a list by the middle of the year. But that list has not materialized, and it remains unclear when and how the selection process will proceed. The criteria, as of now, remains undisclosed.

For hedge funds, the delay is not necessarily bad news. For one thing, it gives them more time to press their view that no U.S. hedge fund--not a single one--poses any systemic risks. The latest argument comes from a professor and a graduate student at Columbia Business School and a Citigroup staffer, who have produced a paper laying out the magnitude of the risks hedge funds pose.

According to Deal Journal, the study has found that the "average hedge fund is 'modestly leveraged,' with borrowed money amounting to just over two times the fund's equity, according to the research. What's more, funds reduced their leverage ahead of the housing crisis, even as banks increased leverage. In the first quarter of 2009, the average fund was leveraged at 1.4 times its equity, even as leverage at investment banks topped 40 times, says the paper, which is based on data from various funds of hedge funds."

This dovetails with AIMA's view that "no single hedge fund firm today is sufficiently large, leveraged, complex or interconnected that its failure or financial stress would cause a market disruption sufficient to destabilize the financial system." The global association also notes that hedge funds are much less leveraged than banks and other institutions.

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