IMF Warns Hedge Fund Growth Raises Systemic Risk, Urges Closer Scrutiny

The IMF warned Tuesday that hedge funds have more than tripled in size over the past decade, posing growing risks to financial stability through leverage and opacity, and called on policymakers to tighten monitoring. Hedge fund assets reached roughly $13 trillion in early 2026, up from $4 trillion in 2013, according to a chapter of the IMF's Global Financial Stability Report, with the full report due Oct. 13. The growth has come primarily through leverage, including synthetic leverage via derivatives. The funds' footprint in sovereign bond markets has expanded sharply, particularly in US Treasuries, where they now account for 9% of the market versus 4% in 2022. The IMF said hedge funds can boost market efficiency but may amplify stress during downturns. It described the sector as "inherently opaque," making risk assessment difficult, and urged policymakers to close data gaps and strengthen monitoring of potential vulnerabilities.