Alternative Market Briefing

Hedge funds should keep watch on changing regulatory environment

Thursday, February 09, 2012

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Barbara Wall From Komfie Manalo, Opalesque Asia:

UCITS or Undertakings for Collective Investment in Transferable Securities funds are becoming more popular amongst hedge fund managers who line up to launch under the platform but many of them miss their mark because of the changing regulatory environment, said research firm Cerulli Associates. While fund managers struggle to break out from the pack and offer complex, high alpha products, regulators and fund distributors are looking for simplicity and straight-forward strategies, the study added.

Cerulli Associates’ director Barbara Wall commented, "It is unlikely UCITS overseers will allow the brand to be compromised in any way. While some managers have successfully circumvented the shorting ban, their interests may be better served by looking to strategies other than shorting within the complex UCITS structure to secure returns."

Wall advised hedge fund managers keep their eye on the ever changing regulatory machine. One of the adjustments managers will have to consider is the abandoning of direct short selling, which has been widely criticized as counterproductive.

As well as focusing on strategies that side-step the shorting ban, critics are also focusing on the use of other derivatives - primarily synthetic exchange-traded funds (ETFs) in alternative UCITS. Cerulli noted that the latest ETF sales figures released during the 20......................

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