Hedge funds pose a risk, but less alarming, says Federal Reserve Bank of New York

The Federal Reserve Bank of New York said on Wednesday that the risk hedge funds pose to the global financial system has reached levels by some measures comparable to those just before the Long Term Capital Management fund imploded in 1998. But the New York Fed said the similarities - involving close correlation among hedge fund returns seen before the LTCM crisis and again recently - had different causes, making the current environment less alarming.