FCA survey finds high levels of leverage in hedge fund sector

Gross notional exposure to interest rate and forex derivatives on the rise

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FCA: found gross notional value of interest rate derivatives used by hedge funds vastly outstrips all other derivatives

The UK Financial Conduct Authority's (FCA) 2015 Hedge Fund Survey has found the sector remains "highly concentrated" in terms of assets under management, strategies, the use of leverage, number of open positions and counterparty risk.

The funds in the survey obtain leverage primarily through derivatives positions, with interest rate derivatives a particular source of synthetic leverage.

The mean fund in the survey is 27 times synthetically leveraged in relation to its net asset value (NAV). One