Thu, Jan 29, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: ETF ownership limits - Trap for the unwary hedge fund

Monday, July 26, 2010

This article was authored by Jay B. Gould, Ildiko Duckor, Clint A. Keller and Michael G. Wu of international law firm Pillsbury:

In recent years, many hedge funds have significantly increased their holdings in exchange-traded funds (ETFs). Historically, hedge funds primarily acquired short positions in ETFs to hedge their long positions in a particular industry segment by obtaining short exposure to an entirely different industry segment. However, many hedge funds are now acquiring long positions in ETFs as part of their core investment strategies. Hedge funds and their managers should be aware that substantially increasing their long positions in ETFs could result in such hedge funds violating the ownership limit set forth in Section 12(d)(1)(A)(i) of the Investment Company Act of 1940 (the Investment Company Act). Although Section 12(d)(1)(A)'s limitations apply to investments in any registered investment company, including closed-end funds, the discussion below focuses on ETFs due to their popularity as a component of the investment strategies of hedge fund managers.

Current Regulations Affecting a Hedge Fund's Ability to Acquire Shares of an ETF Under the Investment Company Act, private investment funds (e.g. hedge funds) are generally prohibited from acquiring more than 3% of an ETF's shares (the 3% Limit). In order to allow purchases of their shares in excess of the 3% Limit, many ETFs have sought exemptive relief from the Securities and Exchange C......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - U.S. investors favor currency hedged Europe ETFs as euro tumbles, Quants win back investors as Swiss franc fuels volatility gains, David Einhorn's $7bn hedge fund is loading up on this stock, Hedge fund BlueMountain Capital unveils Ocwen Financial short, claims default on notes[more]

    U.S. investors favor currency hedged Europe ETFs as euro tumbles From Reuters.com: U.S. investors stung by the falling euro who want to stay invested in Europe are turning to exchange-traded funds designed to strip out the impact of the region's currency. The biggest among so-called "cur

  2. News Briefs - Millennials use tech tools to jump into investing, Winklevoss twins to launch bitcoin exchange with FDIC insured deposits, Robertson’s legacy from hedge funds to New Zealand, Real estate managers exploring smaller open-end funds[more]

    Millennials use tech tools to jump into investing It is the Facebookification of monetary investing. From social networking platforms that enable young investors to stick to every other's stock-picking mojo, to internet sites for initially-timers hungry for a piece of the Silicon Valley

  3. Update: Prosecutors seek 12 years for hedge fund manager Francisco Illarramendi[more]

    Komfie Manalo, Opalesque Asia: Federal prosecutors have asked the court to sentence convicted hedge fund manager Francisco Illarramendi to 12 years imprisonment for running an elaborate Ponzi scheme that bilked investors hundreds of millions in dollars, including a Venezuelan pension fund, report

  4. Institutions - Ontario pension fund leader calls all asset classes ‘expensive’, Taiwan's BLF plans $2bn in alternative mandates[more]

    Ontario pension fund leader calls all asset classes ‘expensive’ From WSJ.com: The head of one of the world’s largest pension funds said that across asset classes, “everything is expensive.” Ron Mock, who leads Canada’s $141 billion Ontario Teachers’ Pension Plan, said that the plan would

  5. Opalesque Exclusive: Ex-Citi trader launches 'sleep-at-night’ long/short equity fund[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: After working at Citi's proprietary trading desk, managing a large portfolio between 2008 and 2011, Joel S. Salomon founded SalauMor Management in New York