Investment managers ramp up leverage with NDFs

SEC allows funds greater leverage on NDFs

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Investment managers are increasingly trading traditional G-10 forwards as non-deliverable forwards (NDFs) in a bid to boost their leverage on market positions in the US, often by as much as ten times, leading to concerns this could mask the extent of risk being taken by funds.

Thanks to an interpretation given by the Securities and Exchange Commission (SEC) regarding leverage rules under the 1940 Investment Company Act, investment firms that are regulated by the Act and trade cash-settled

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