Gwyn Roberts

20/07/2011 Author: Gwyn Roberts

Editor's view: 21 July 2011

While normally partisan politicians have at least attempted to speak with one voice on the UK’s ongoing hacking scandal, Europe’s sovereign crisis seems as consensus-light as ever. And, as European leaders dither, risking a potential Lehman-like contagion, managers are once again worrying about counterparty risk.

Those with significant prime brokerage accounts at European banks are particularly concerned. “This crisis isn’t going away” a COO at the major firm told HFMWeek this week. “As such, we are keeping a close eye on all of our prime brokerage arrangements.” This is sensible; because a sovereign default, and the impact it would have on the holdings of European banks, could have a huge effect on the hedge fund market.   

However, this time managers are better prepared. In the week that Man’s decision to take on GLG’s Lehman exposure reminded us all just how dire the situation was at the height of 2008, the 2011 hedge fund generally knows where its assets are.

Balances at prime brokers are currently stable, but if the situation worsens – as HFM’s COO suggests it may – contingency plans exist to switch accounts and secure assets. Of course, nothing is completely safe, but a combination of better operational standards and investor pressure has this time at least made managers ready.

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