Meme stocks and Archegos episodes highlight need for greater hedge fund transparency, Fed financial stability report says - MarketWatch

financial system, the Fed called for greater transparency at hedge funds and other non-banks.

The Archegos event illustrates the limited visibility into hedge fund exposures and serves as a reminder that available measures of hedge fund leverage may not be capturing important risks,” said Fed Governor Lael Brainard.

“The potential for material distress at hedge funds to affect broader financial conditions underscores the importance of more granular, higher-frequency disclosures,” she added. .

“While broader market spillovers appeared limited, the episode highlights the potential for material distress at non-bank financial institutions to affect the broader financial system,” the report said. .

“Some hedge funds with substantial short positions sustained losses during the meme stock episode in January 2021, though the effects on the hedge fund sector overall appear to have been limited,” the Fed said