Fitch warns on hedge funds in structured credit

Credit market participants have been warned of dangers linked to hedge fund participation in their home turf, by one of the leading ratings agencies, Fitch Ratings

A report by Fitch has found credit hedge funds dealing in instruments such as distressed debt, derivatives and structured products such as CDOs grew faster than their hedge peers, and warned their impact on credit markets is "not well understood," their impact is beyond their asset size due to their trading frequency and volume, and "willingness to invest in higher-risk markets such as high-yield corporate securities and subordinated structured finance tranches," the report added.

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