Investment fund leverage: the known unknowns
More work needed on first-mover redemption incentives and margin calls, says Iosco chief
A quick internet search of ‘leverage and money’ produces an impressive array of stories about how ‘everyday traders’ make countless amounts of money from leveraged trading strategies. But one of the top hits is also a cautionary quote from Warren Buffet: “When you combine leverage and ignorance, you get some pretty interesting results.”
The trouble is, leverage in investments is often wrapped up in a product or investment structure that is off-balance sheet or otherwise embedded, so its scale
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