In addition to the overt leverage i.e. borrowing, hedge funds take derivative positions which result in leverage e.g. delta in an option, margin in a future.
Employing derivative positions will increase a hedge fund's leverage i.e. large losses or large gains possible per unit of commitment.
It is also well known that hedge funds are less regulated than unit trusts/ mutual funds. And so brave derivative positions are the norm!
Last edited by a moderator: Sep 5, 2009