IMF Warns $13 Trillion Hedge Funds Amplify Risks

The International Monetary Fund warns that hedge funds’ rapid growth and extensive borrowing could make them a source of wider financial instability during market stress. Their assets reached nearly $13 trillion in early 2026, and the widening gap between gross and net assets points to a substantial increase in leverage; funds are also becoming more prominent in U.S. Treasuries and increasingly crowded trades. In calm markets, hedge funds can support liquidity, market efficiency and price discovery, but leverage can leave them vulnerable to margin calls that force rapid sales and deepen price declines. Similar positions among major funds could prompt synchronized selling, turning liquidity providers into liquidity seekers and transmitting turmoil across markets. The IMF is calling for better data, monitoring and oversight to address risks that are difficult to assess because the sector is opaque.