Because some hedge fund trading strategies depend on the immediate availability of capital and will not work without sufficient lines of credit, banks may retain enough influence over hedge funds even where funds use multiple lenders.
Source quote, verbatim
Without sufficient lines of credit to supply required additional capital, these trading strategies may not work. Perhaps banks will have enough influence over hedge funds even if hedge funds have multiple lending relationships.
Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252
Holds when
fund uses dynamic trading strategies requiring additional capital on short notice
Classification
mechanismsupport: arguedsystemic-risk
Related claims
restated_bykaal:claim:2998097-008 Fund managers are unlikely to escape bank based indirect supervision by terminating a lending relationship, be...
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