Normal Leverage of a Hedge fund or famous traders?

Question

Where can I find information about average leverage used by hedge funds or famous traders like soros? I'm particulary interested in forex/equity areas.

Answer 1

I can tell you some ranges but I think most data is a closely guarded secret for hedge funds that are currently active. Thats quite sensitive info that can be used to hurt highly levereged funds.

Most investment banks right now were at between 8:1 and 12:1 leverage. Some of them, esp Goldman Sachs are basically hedge funds in terms of operations. Bear Stearns was at about 10:1 when it blew up.

There are some hedge funds operating at about 20X leverage but that is REALLY pushing it and it applies prob exclusively to Forex trading and arbitrage since they have the smallest moves to make a profit.

Finally the famous LTCM fund which blew up had 35:1 leverage the most I have ever heard of and they nearly destroyed the US bond markets single handedly.

The appropriate amount of leverage to use is one of the hardest things to find out since it depends on the market, the volatility, the economic environment, the liquidity, the spreads in the market, and a whole host of other issues. I personally doubt most funds and traders and operate at more than 15X leverage without running into serious problems in the long term.

Answer 2

it depends on the manager.  some don't use leverage at all, while others are levered at more than 20x.

but leverage is dangerous - BSC was (overall) levered at a bit more than 20x, and look how it turned out for them.  for this reason, the average manager is levered at less than 2.5x, (tops!) if at all.