Hedge Funds, Financial Intermediation, and Systemic Risk

[...]This article examines how the nature and characteristics ofhedge funds may generate “market failures” that make CCRMfor exposures to hedge funds intrinsically more difficult tomanage, both for the individual firm and for policymakersconcerned with systemic risk. We put forward no specific newpolicy proposals, however, because we believe CCRM remainsthe appropriate starting point for limiting the potential forhedge funds to generate systemic disruptions.2 By laying outthe issues and highlighting the specific linkages from hedgefunds to systemic risk, we hope to highlight areas for furtherresearch on when and how markets may fail to yield a desirableoutcome.[...]