(HedgeCo.Net) Hedge fund leverage — already elevated — is climbing sharply as managers seek higher returns in a competitive, low-yield environment. Prime brokerage data shows borrowings and leverage levels nearly doubling over the past two years, reflecting a renewed appetite for risk and amplified directional bets. Apollo Academy
The Leverage Landscape
Leverage has become synonymous with hedge fund strategy in 2025, driven by:
- Thin cash buffers
- Strong equity positions
- Complex macro hedging
While leverage can boost returns, it also magnifies losses when markets wobble — a dynamic hedge funds are rigorously managing as volatility signals spike.
Implications for Markets
Heightened leverage across the industry contributes to:
- Greater systemic risk
- Amplified price moves
- Faster capital flows into/out of assets
As hedge funds reposition for a potentially turbulent 2026, risk management — not just returns — has become a central theme among allocators and investors.