Sun, Nov 29, 2015
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. Other Voices: Hedge fund marketing and the selling cycle[more]

    By Bruce Frumerman. How long is the selling cycle now? That’s a question my financial communications and sales marketing consulting firm has been asked on a regular basis by hedge fund firm owners and sales people, ever since we opened the doors to our firm in 1987 pre-crash. Wa

  2. People - Solus Alternative Asset Management adds chief strategist from BTIG[more]

    From Daniel Greenhaus joined hedge fund manager Solus Alternative Asset Management as managing director and chief strategist. He will work closely with Chris Bondy, Solus’ chief economist, managing director and executive vice president, said Chris Pucillo, CEO and chief investmen

  3. Opalesque Roundtable: Seeding deal terms can be onerous for hedge funds[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Executives from fund of funds firms, family offices, a placement agent, a private equity firm, and an accounting firm gathered in Connecticut last month for the

  4. Opalesque Roundtable: Family offices flock to co-investment[more]

    Bailey McCann, Opalesque New York: Co-investments have been a hot topic for pension funds in recent years, as they try to move away from high fees and improve transparency. But now, family offices are more readily getting into the mix and establishing in-house deal teams, according to the delega

  5. More institutional investors invest in CTAs compared to last year despite dissatisfaction with performance[more]

    Benedicte Gravrand, Opalesque Geneva: "Despite a strong start to 2015 for CTAs in Q1, commodity market conditions have made return generation difficult for fund managers over much of the rest of the year to date," says Preqin’s November