Targeting hedge funds and 'repo runs'

This chapter sets out to explore the role of hedge funds in the context of evolving market developments in credit intermediation, in particular, with regard to sale and repurchase transactions (so-called “repos”)—an important and increasingly high profile facet of the shadow banking universe. More pertinently, it seeks to critically analyze the ways in which hedge funds can trigger and, in turn, help to transmit systemic risks in the context of repo transactions. In doing so, the chapter aims to challenge long-maintained claims—both from within the hedge fund sector itself, and amongst certain sections of the academic community—which downplay, or even dismiss, concerns relating to the capacity of hedge funds to cause significant disruption to the wider financial system. The validity or otherwise of these claims has a bearing on the ongoing debate with regard to the need for additional regulatory oversight of hedge fund activities, both in the context of repo transactions and, indeed, more generally.