Key Takeaways
- • Hedge fund gross assets under management have tripled since 2013 to $13 trillion, according to a new IMF blog previewing an analytical chapter of its October 2026 Global Financial Stability Report.
- • Gross notional exposures, including on- and off-balance-sheet positions, total roughly $40 trillion, and hedge funds held about 9% of US Treasurys in 2025.
- • The IMF finds hedge funds improve liquidity, price discovery and risk sharing in normal times, but leverage, crowded positions and redemption pressure can turn them into amplifiers of market stress.
- • In past stress episodes identified by VIX spikes, the most widely held stocks were 10 percentage points more volatile and suffered peak-to-trough losses 4 percentage points deeper than the least crowded stocks, with effects amplified by concurrent redemptions and leverage.
- • The IMF calls for better data and targeted policy tools, and warns that hedge fund losses can spill over to prime brokers, reducing their lending capacity.
Summary
Hedge funds have grown substantially in scale and systemic relevance over the past decade. According to a new IMF blog by Andrea Deghi, Taneli Makinen, Mahvash S. Qureshi and Felix Suntheim, hedge fund gross assets under management have tripled since 2013 to $13 trillion. Gross notional exposures, including both on- and off-balance-sheet positions, are around $40 trillion. In 2025, hedge funds held about 9% of US Treasurys. The blog previews an analytical chapter of the IMF's October 2026 Global Financial Stability Report.
The IMF's central conclusion is that hedge funds make markets work better in normal times, supporting liquidity, price discovery and risk sharing. Under stress, however, their leverage, less liquid holdings and ability to reposition quickly can magnify shocks. The Fund identifies three main vulnerabilities: leverage, crowded positions and redemption pressure. Leverage stems mainly from repurchase agreements, prime broker credit and derivatives. When volatility rises or financing tightens, margin calls can force sales, shifting hedge funds from providing liquidity to absorbing it.
To quantify these effects, the researchers used spikes in the VIX to identify periods of market stress. During those periods, the most widely held stocks were 10 percentage points more volatile than the least crowded ones, and their peak-to-trough losses were 4 percentage points deeper. Volatility and losses were larger still when funds holding those stocks faced redemptions at the same time, and leverage amplified both effects.
The analysis also highlights transmission risk beyond the funds themselves. Hedge fund losses can spill over to prime brokers, which are typically large dealer banks, and reduce their capacity to lend. The IMF's call for better data and more targeted tools reflects this concern about visibility into fund leverage and positioning during periods of stress.
{"categories":["hedge-fund","regulatory","institutional"],"content_type":"article","keywords":["hedge fund leverage","crowded positions","redemption pressure","IMF Global Financial Stability Report","prime brokers","systemic risk","US Treasurys","VIX"],"mentioned_companies":["International Monetary Fund"],"mentioned_people":["Andrea Deghi","Taneli Makinen","Mahvash S. Qureshi","Felix Suntheim"],"has_cta":false,"translated_title":null}
The IMF's central conclusion is that hedge funds make markets work better in normal times, supporting liquidity, price discovery and risk sharing. Under stress, however, their leverage, less liquid holdings and ability to reposition quickly can magnify shocks. The Fund identifies three main vulnerabilities: leverage, crowded positions and redemption pressure. Leverage stems mainly from repurchase agreements, prime broker credit and derivatives. When volatility rises or financing tightens, margin calls can force sales, shifting hedge funds from providing liquidity to absorbing it.
To quantify these effects, the researchers used spikes in the VIX to identify periods of market stress. During those periods, the most widely held stocks were 10 percentage points more volatile than the least crowded ones, and their peak-to-trough losses were 4 percentage points deeper. Volatility and losses were larger still when funds holding those stocks faced redemptions at the same time, and leverage amplified both effects.
The analysis also highlights transmission risk beyond the funds themselves. Hedge fund losses can spill over to prime brokers, which are typically large dealer banks, and reduce their capacity to lend. The IMF's call for better data and more targeted tools reflects this concern about visibility into fund leverage and positioning during periods of stress.
{"categories":["hedge-fund","regulatory","institutional"],"content_type":"article","keywords":["hedge fund leverage","crowded positions","redemption pressure","IMF Global Financial Stability Report","prime brokers","systemic risk","US Treasurys","VIX"],"mentioned_companies":["International Monetary Fund"],"mentioned_people":["Andrea Deghi","Taneli Makinen","Mahvash S. Qureshi","Felix Suntheim"],"has_cta":false,"translated_title":null}
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.