BusinessCorporate FinanceHedge funds lower debt levels

Hedge funds lower debt levels

Hedge funds ease gearing by a tenth, as credit crunch looms

Hedge funds have slashed the level of their gearing by
10 percent according to a private survey by British regulators.

The findings come amid growing fears that funds and companies have been
loading themselves with too much debt and are creating the possibility of a
collapse that could ripple through the financial sector.

According to the FT
, a survey by the
FSA
of the main lenders to hedge funds found that the ratio of debt
to net equity fell from 1.86 times in April 2006 to 1.66 times in October 2006.

Leading figures such as Jon Moulton, the head of Alchemy Partners; and Philip
Yea, chief executive of 3i, have warned about the risks of over-leveraging and
the fragility of some hedge fund players.

Further reading:

Private equity seeks new model to cut advisers’ fees

FSA to issue leveraged loan warning

Deal makers risk collapse

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