Hedge funds have more than tripled in size over the past decade, reaching $13 trillion in assets, according to the International Monetary Fund. The IMF warned that their increasing footprint in markets, particularly US Treasuries, combined with leverage and opacity, poses risks that warrant closer policy monitoring.
The growing size and market influence of hedge funds, coupled with their use of leverage and opacity, present potential systemic risks that could be amplified during periods of market stress, prompting calls for increased regulatory oversight.
Hedge funds have significantly expanded their market presence over the past decade, with assets tripling to approximately $13 trillion in early 2026 from $4 trillion in 2013, according to the International Monetary Fund. The IMF highlighted that these funds are playing increasingly critical roles in trading, liquidity provision, and risk transfer.
The IMF's findings, published Tuesday as part of a chapter from its upcoming Global Financial Stability Report, noted that hedge fund growth has been largely driven by leverage, including synthetic leverage through derivatives. Their footprint has notably expanded in sovereign bond markets, particularly US Treasuries, where they now account for 9% of the market, a substantial increase from 4% in 2022.
While acknowledging that a greater hedge fund presence can enhance market efficiency, the IMF cautioned that their leverage and fewer risk constraints can amplify market stress during downturns. The organization also pointed to the inherent opacity of hedge funds, which makes it difficult to accurately assess their risks and exposures. Consequently, the IMF urged policymakers to address data gaps and bolster risk monitoring for potential vulnerabilities within the sector.
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