Hedge funds and those doing business with them were on Monday warned by the US Treasury not to operate “under the false allusion” that systemic risk from their activities was not a “real possibility” in spite of the increased sophistication of risk management.

The comments are the strongest sign yet of US policymakers’ concern that markets should not take undue comfort from the relative lack of fall-out from last year’s multi-billion dollar losses at hedge fund Amaranth.