The academic insights behind fears of a buy-side crunch

Risk of fire sales by highly levered funds is chief worry among influencers of regulatory thinking

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Arguments about the systemic risk of asset managers often descend into attacking the wrong targets, thinks a former member of the Federal Reserve Board. "You have to be clear," he says. "It's not the kind of systemic risk like a replay of Lehman Brothers: big institutions toppling over. The concern is that if things went really wrong and you got a big wave of redemptions, credit spreads would widen very substantially and you get a credit crunch. That would knock a percentage point or two off GDP