Hedge funds are playing an increasingly influential role in Europe’s bond markets, particularly in Italy, where they are seen as providing liquidity and enhancing market efficiency, according to a report by Reuters citing Italy's debt chief, Davide Iacovoni.

Speaking at a financial markets conference in Brussels, Iacovoni highlighted that hedge funds have been more beneficial than harmful to Italy's bond market despite concerns about their lack of obligation to stabilise markets during volatility.

Hedge funds accounted for over half of the euro zone’s sovereign bond trading volumes on the electronic platform Tradeweb last year and have become essential participants in government debt auctions, Reuters previously reported. In Italy, their presence is even more pronounced, representing around two-thirds of trading volumes on Tradeweb.

“This is something we have to manage, balancing the risks and benefits,” Iacovoni said, acknowledging that hedge funds differ significantly in strategies and impact. "When it comes to the big ones, you need to understand their strategies."