Investment funds will come under increased focus from global financial regulators, the head of a world-wide push to prevent a repeat of the financial crisis said on Sunday. Bank of England Governor Mark Carney, who is also head of the Financial Stability Board group of regulators, said assets managed by investment funds were now equivalent to almost 90 percent of the global economy.
Carney said the growth of asset management brought welcome diversity to the financial system.
"However, there must also be a focus, as there has been with banks, on the systemic risks it could create," he said in a speech on the sidelines of meetings at the International Monetary Fund in Washington.
"The biggest risks arise from combining high levels of leverage with holdings of illiquid assets and commitments to provide liquidity at short notice," he said.
"In the current environment, those types of activities need careful monitoring, and possibly a deliberate policy response."
Carney's comments echoed those made by BoE Deputy Governor Jon Cunliffe earlier this year who said financial markets appeared to have underpriced the risk of investments proving illiquid.
Major asset managers include Blackrock, Legal & General, Prudential's M&G unit and State Street .
Carney also said in his speech that a summit of leaders of the Group of 20 economies to be held in November would be a watershed moment in the push to make the financial system safer.