PAAMCO Talks Leverage Usage In Risk Management

Sophisticated investors know to keep an eye on the often lightly disclosed topic of leverage usage for some time.  A new report from the Pacific Alternative Asset Management Company (PAAMCO) takes the concept deeper by discussing two types of leverage: implicit and explicit leverage.

“It is essential to be aware of the existence of both types of leverage before an investor can fully monitor and assess the risk associated with their investments,” the report stated.

Explicit Leverage

Explicit leverage is money or assets contractually borrowed for a fee, often borrowed from Prime Brokers. A common example can be found when a...