Market-neutral strategies attempt, as I mentioned earlier, to exploit differences in the valuation of various securities, while trying to protect themselves against overall market risk. Directional strategies entail finding macroeconomic trends and trying to predict future market movements. Event-driven strategies aim to identify securities whose prices will be affected by specific corporate events, such as acquisitions, mergers and bankruptcies. Neither of the latter two investment strategies is thus hedged in Jones’ original sense. Many hedge funds describe themselves as "multi-strategy” – they combine different strategies over time to achieve the highest possible earnings. This also applied to Amaranth, but the fact was that half of the fund’s assets were invested in forward contracts for natural gas. Many hedge funds also use complex trade strategies, where they try to find discrepancies between different derivative prices or maturities and their theoretical values. The well-known hedge fund Long Term Capital Management (LTCM), which crashed in 1998, was this type of fund. Developments internationally and in Sweden Over the past ten years, hedge funds have grown considerably, both in terms of number and the amount of capital managed. Internationally, the capital managed has grown by almost 30 per cent a year since 1998. Today the hedge funds manage approximately USD 1,000 billion, corresponding to around 5 per cent of the total capital managed internationally, divided between 8,000 funds. Most hedge funds are relatively small, most have fewer than SEK 800 million in managed capital and almost half of them have less than SEK 200 million. However, there are exceptions.

The recommendation exceptionally has adopted a “one-size-fits-all” approach owing to the current economic uncertainty banks are experiencing, leaving them quite simply unable to forecast their medium-term capital needs accurately. We will review this recommendation in December, and unless we conclude that the banks’ capital projections remain clouded by exceptionally high uncertainty, we should revert to our usual supervisory practice of assessing the planned distribution of dividends on a bank-by-bank basis, taking into account the safety and resilience of the banking system as well as the preservation of its intermediation function at a time of deteriorating asset quality and increased capital consumption. Another new development concerns the leverage ratio. On the basis of the amendments to the Capital Requirements Regulation, ECB Banking Supervision has allowed significant credit institutions to exclude central bank exposures from the calculation of their leverage ratios until July 2021. ECB Banking Supervision has cooperated with and sought the views of the ECB’s central bank function in order to tailor the scope of this temporary exemption so that it covers only those claims on the central bank that are related to the implementation of monetary policy. The measures in relation to dividends and the leverage ratio, as well as the other measures providing temporary capital, liquidity and operational relief to banks, are exceptional measures which are justified as long as the impact of the COVID-19 crisis continues to be felt. We may also decide to discontinue some of these measures, as we did for some of the operational relief measures in July.