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CDS counterparty risks serious threat to global financial markets

Hedge Funds Review Magazine – Greenwich Associates conducted a study of 146 institutions in North America and Europe to determine how fears of counterparty risk were affecting institutional investment and trading strategies.

The study revealed that 37% of participating institutions have over $50 billion in assets under management. A further 18% have more than $100 billion.

Survey respondents were divided between 32 hedge funds, 114 banks and traditional long-only investors, with the majority domiciled in the US (70%) and 30% in Canada and Europe.

Among US institutions, 85% sees credit default swap (CDS) counterparty risk as a serious threat to global markets. Institutions in Europe are slightly more sanguine; with just over 55% describing CDS counterparty risk as a significant danger.

Over 905 of hedge funds, however, said they see counterparty risk relative to credit default swaps as posing a significant threat to global markets.

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