Hedge Funds May Be Forced to Sell Bonds, Debt Assets, ECB Says

Bloomberg- Hedge funds may be forced to sell bonds and asset-backed debt amid tighter lending standards and poor returns, the European Central Bank said in its six-monthly Financial Stability Review.

Volatile financial markets, investor redemptions and difficulties meeting margin calls have resulted in a “challenging period” for the $1.9 trillion industry and that will continue, the ECB said in the report published today.

“Some leveraged credit-focused hedge funds have been particularly badly hit,” the ECB said. “Moreover, many hedge funds still remained vulnerable to tougher lending stances of prime brokers and a further deterioration in financial markets. Further de-leveraging and forced sales in credit and other asset markets cannot be excluded.”

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