Wall Street’s Hottest Business Is About to Cool
The private equity and hedge fund lending boom is running into lower interest rates and tighter rules.
Banks and shadow banks are meant to exist in separate worlds, but the financial links between them are increasingly seen as a source of potential instability. That’s a problem for banks because the business of forging those ties has lately been among the hottest activities on Wall Street.
The largely unseen lending boom in the fixed-income, currencies and commodities (FICC) trading arms of big banks has been driven by two of the strongest trends of the past decade: the secular rise of private markets and multi-strategy hedge funds. Now, with watchdogs focusing more on the risks and with interest rate cuts around the corner, the question is whether so-called FICC financing is about to run out of steam.