Australian hedge funds have been given a broadly clean bill of health by the Australian Securities and Investments Commission (ASIC), with the regulator publishing a new report which found that the vast majority of investors were superannuation funds and that most hedge funds could liquidate 92 per cent of their portfolios within 30 days.
Releasing the results of the ASIC research at a hedge fund forum in Sydney yesterday, ASIC commissioner Greg Tanzer said the regulator had concluded that hedge funds did not currently pose a systemic risk to the Australian financial services industry or broader economy.
He said this was because of the following characteristics of the local surveyed hedge funds:
* They account for a small share of the managed funds industry
* They have a predominantly wholesale investor base
* The depth and liquidity of the markets in which they have their greatest exposures
* The small share of the markets in which they trade and their low share of the turnover on those markets
* Their low levels of leverage
* Their ability to liquidate 92 per cent of their portfolios within 30 days and to suspend investor redemptions, and
* The low levels of collateral posted with counterparties, limited rehypothecation of fund assets and the use of multiple prime brokers.
Tanzer warned however that ASIC's analysis of the industry had not included smaller hedge funds or those domiciled overseas.
Elsewhere in his speech, the ASIC commissioner said it was important to understand, when considering the systemic significance of the sector, that identified hedge funds accounted for only about 3 per cent of the $2.1 trillion in assets held by the Australian managed funds industry in total.
