Treasury official: beware complacency

The hedge fund industry is at risk of being lulled into a false sense of security that could expose the broader financial markets to additional risks, according to Anthony Ryan, assistant secretary of the Treasury for financial markets. Mr. Ryan spoke today in Chicago to more than 300 attendees at the Managed Funds Association Summer Conference. "We must be humble enough to realize a systemic risk in the financial markets cannot be discounted," he said. "We are very blessed to work in the very best capital markets in the world," he added. "But the challenge is in keeping pace with our risk management practices." Mr. Ryan warned that to help prevent a scenario where a hedge fund collapse would adversely affect the broader financial markets, the entire industry needs to step up and take more responsibility. He described the current environment as the perfect storm for systemic risk with increased liquidity, leverage and rising return correlations. "Financial institutions need to be more disciplined and closely monitor risks," he said. "This is not an endorsement of the status quo, every set of stakeholders has work to do."