Hedge funds may lack CDS expertise

Long/short equity hedge funds are increasing their exposure to credit default swaps, but they may not be using them in appropriate ways, according to research from Hennessee Group, an adviser to hedge fund investors. "We are concerned about the use of these instruments by funds that are not well-versed in how these markets trade and the dynamics of counterparty risk," says Charles Gradante, the firm's managing principal.

Though credit default swaps have been commonplace in credit-oriented hedge

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