Hedge Fund Participation in Cleared Repo

By Neth Karunamuni and Robert Mann

Published: March 3, 2026

Hedge funds whose counterparties had lower supplementary leverage ratios in the previous quarter used sponsored repo significantly more in the following quarter. This increased usage mostly occurs in the last month of the quarter.

Hedge funds finance their Treasury positions with leverage obtained via repurchase agreements (repos) typically collateralized by Treasuries. Recent estimates suggest that about 75% of all hedge fund Treasury repo activity is not centrally cleared; this brief examines hedge fund participation in this market and whether they are prepared for the SEC Treasury clearing rule. While hedge funds are largely operationally prepared to clear repos, balance sheet benefits for the dealer appear to be a major motivator for a hedge fund to centrally clear a repo (Brief no. 26-01).

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