IMF calls for closer monitoring as hedge funds expand market footprint
The International Monetary Fund (IMF) has called for closer monitoring of hedge funds' use of leverage after highlighting that the sector has more than tripled in size over the past decade, according to a report by Reuters. The IMF said hedge fund assets had reached approximately $13tn in early 2026, compared with around $4tn in 2013. The expansion has increased the industry's role in trading,…
The International Monetary Fund (IMF) has urged for enhanced oversight of the growing influence of hedge funds in financial markets, citing a significant increase in leverage usage. According to Reuters, hedge fund assets surged to nearly $13tn in early 2026, up from around $4tn in 2013. This expansion has amplified the sector's involvement in trading, liquidity, and risk transfer among financial institutions, primarily driven by leverage, including synthetic leverage via derivatives.
While acknowledging the benefits of hedge funds in enhancing market efficiency and providing liquidity, the IMF cautioned that their leveraged positions could exacerbate market stress during adverse conditions. Additionally, hedge funds have become major players in sovereign debt markets, particularly U.S. Treasuries, now making up about 9% of the Treasury market, more than double their share in 2022.
The IMF highlighted the opacity of the hedge fund industry, noting gaps in data that hinder policymakers' ability to gauge the sector's risks. It emphasized the need for improved data collection and risk monitoring to help regulators identify vulnerabilities stemming from hedge fund leverage and its interconnectedness with the broader financial system. The IMF's insights are part of its forthcoming Global Financial Stability Report, set to be released on October 13.
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