Hedge funds and prime brokers adapt to mitigate financial stability risks.
Hedge funds have grown significantly since 2000, reaching over $3.5 trillion in assets by 2017. They face risks from using leverage and investor redemptions, which can affect the financial system. Changes since the financial crisis, like adjustments in business models and regulations, have helped reduce some of these risks. Hedge funds mainly rely on prime brokerage services from banks, which have also adapted their models post-crisis.