Bloomberg is reporting that hedge funds using debt-trading strategies honed on Wall Street are expanding at a record pace as they profit from risks big banks are no longer taking.

Bloomberg said the flow of funds and people is taking place as regulators demand banks curb proprietary trading and back riskier wagers with more capital to prevent another financial crisis.

Bloomberg noted that has allowed so-called shadow-banking firms to expand in businesses contracting at the largest lenders, including distressed-debt trading and fixed-income arbitrage, a strategy that seeks to profit from short-term price differentials.

To read the Bloomberg story click here.