Hedge funds are returning to the practice of leveraging, with some levels as high as 50%, Reuters reports. Nonetheless, risk-taking, even by hedge funds, is not expected to return to pre-crisis levels.
Multi-strategy and hedge-funds-of-funds in particular are assuming leveraging, aided by prime brokers willing to extend credit, said Henry Bregstein, an attorney with Katten Muchin Rosenman who was attending the GAIM hedge fund industry conference in Monaco.
Were starting to see some leverage come back into the hedge fund industry, Bregstein said. With the stronger funds, were beginning to see some working on new leverage transactions. Markets appear to have stabilized. However, hedge funds for the most part are staying away from asset-backed securities, currencies and government bonds.
According to the U.K.s Financial Services Authority, leveraging among prime brokers fell to 1.15 times assets in 2008, down from a high of 1.9 times in 2007.
Leverage levels were incredible, he said. Were not going to see that anytime soon, probably not in my lifetime.