The absence of financial market repercussions from the Amaranth failure suggests that indirect regulation of private funds, achieved by having regulators press banks to limit leverage extended to their fund clients, worked.
Source quote, verbatim
The lack of financial market repercussion after the Amaranth failure seems to suggest that this approach was successful.
Wulf A. Kaal, The Systemic Risk of Private Funds after the Dodd-Frank Act (2014). SSRN: https://ssrn.com/abstract=2470008
Holds when
post LTCM supervisory practice of monitoring fund clients through bank leverage limits
the Amaranth failure in 2006
Classification
mechanismsupport: arguedprivate-funds
Related claims
extended_bykaal:claim:2714974-031 Banks are uniquely positioned to discipline hedge fund behavior because their role as lenders, market makers, ...
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