Industry report: Margin Management for Hedge Funds; An Increasingly Complex Calculation

Cassini commissioned Acuiti to conduct a study of how hedge funds were managing margin and collateral in the face of UMR, heightened volatility, and increased scrutiny of risk from prime brokers.

The report showed that:

• There remains significant uncertainty among hedge funds over whether they will be in scope for UMR Phase 6
• This uncertainty is creating a risk for hedge funds that they could face significant consequences by coming into scope for UMR late or without sufficient preparation for compliance
• Hedge funds are becoming more sophisticated in terms of how they manage margin and collateral, but there is a long way to go:
  -Just 13% aggregate and analyze margin requirements intra-day
  – 78% of respondents consider margin when deciding where to trade, but most of these only do so some of the time
  – 30% of respondents said they had a view of margin implications available to traders pre-trade.