The academic insights behind fears of a buy-side crunch

Risk of fire sales by highly levered funds is chief worry among influencers of regulatory thinking

Arguments about the systemic risk of asset managers often descend into attacking the wrong targets, thinks a former member of the Federal Reserve Board. "You have to be clear," he says. "It's not the kind of systemic risk like a replay of Lehman Brothers: big institutions toppling over. The concern is that if things went really wrong and you got a big wave of redemptions, credit spreads would widen very substantially and you get a credit crunch. That would knock a percentage point or two off GDP