Two-thirds of major dealers with at least a decade of experience financing hedge funds said current hedge-fund leverage is above the midpoint of its range over the past 10 years, according to the Federal Reserve’s newly released September Senior Credit Officer Opinion Survey.
The survey, released Sept. 24, covered conditions from June through August 2026 and was conducted from Aug. 11 through Aug. 24. Seventeen institutions participated, representing nearly all dealer financing of dollar-denominated securities to nondealers and some of the most active intermediaries in over-the-counter derivatives markets.
Leverage Above Midpoint
The strongest signal came from a special set of questions asking experienced dealers to compare current leverage with the range they had observed over the previous decade.
Among 15 dealers that had facilitated hedge-fund transactions for all 10 years, 10 placed overall hedge-fund leverage above the decade midpoint: one said it was near the highest level, one considerably above the midpoint and eight somewhat above it. Five put leverage near the midpoint, while none placed it below.
That makes the above-midpoint share 66.7%, an Investozora calculation from the Fed’s respondent counts and equal to the rounded percentage implied by the survey categories.
The breakdown shows that leverage was not distributed evenly across hedge-fund strategies. Among dealers with sufficient history, 76.9% placed equity-oriented hedge-fund leverage above the midpoint, compared with 53.4% for fixed-income-oriented funds and 33.4% for credit-oriented funds, based on Investozora calculations using the Fed’s published response categories.
The equity figure was the clearest divergence: 10 of 13 dealers placed leverage above the midpoint, while three put it near the midpoint and none below it.
Recent Leverage Stable
The long-run comparison does not mean dealers reported a fresh surge during the summer. In the same September Fed survey, 15 of 17 dealers, or 88.2%, said hedge funds’ use of financial leverage remained basically unchanged during the previous three months. One reported an increase and one a decrease, leaving the Fed’s net measure unchanged.
That was little changed from the June SCOOS release, when 18 of 20 dealers, or 90%, reported basically unchanged hedge-fund leverage, while one reported an increase and one a decrease.
The combination is significant: dealers are describing leverage as elevated relative to their own decade-long experience without reporting a broad-based increase in the latest quarter.
That is consistent with the Fed’s May 2026 Financial Stability Report, which said comprehensive Form PF data showed hedge-fund leverage near record-high levels and concentrated among larger funds. The report also noted that hedge-fund strategies using leverage included Treasury securities, interest-rate derivatives and equities.
For background on how securities holdings and financing interact with the central bank’s balance sheet, Investozora’s guide to the Federal Reserve balance sheet provides additional context.
Equity Financing Stands Out
The September survey also found elevated dealer capital commitment to equity financing. Ten of 13 established dealers placed the share of capital committed to equity financing above the midpoint of their 10-year range, including five that put it near the highest level. By comparison, nine of 15 established dealers reported above-midpoint capital commitments to Treasury financing.
Financing conditions themselves did not show a broad tightening during June through August. Price and nonprice terms across securities financing and OTC derivatives were basically unchanged on net, while 23.5% of dealers said hedge funds had increased efforts to negotiate more favorable terms.
The September results therefore point to a distinction between level and momentum: leverage is high relative to dealers’ decade-long experience, particularly among equity-oriented hedge funds, but dealers did not report that leverage broadly increased during the latest three-month period.
The next SCOOS can show whether that stability persists. Because the Fed’s long-term comparison was included as a special set of September questions, however, an identical decade-range comparison is not guaranteed in the next quarterly survey.
