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Alternative Market Briefing

The stifling of hedge fund creativity through regulation and lack of assets

Thursday, December 27, 2012

Benedicte Gravrand, Opalesque Geneva:

Regulation and lack of assets are chocking the hedge fund industry and for this reason, it may never be what it was back in the 90s, participants at the recent Opalesque Geneva Roundtable said. If you compare a genius investment manager to Picasso, it could be said that one the one hand, he has no paint, brushes or canvas to work on (read: assets), and on the other hand, he does have all that, but he has to comply with unsuitable conditions (i.e. regulation, compliance, etc.) Not easy being a hedge fund Picasso these days. But genius is resourceful. And there are some places where one can get paints and brushes without having to climb up a hight steep mountain.

It is difficult for new fund managers to get started, and this is a threat to the alternative investment space going forward, said Ian Hamilton, founder of the IDS Group (IDS develops bespoke platforms and plug and play opportunities to help new managers set up and grow).

The cost of regulation has become totally unbearable, agreed Jean Keller, who heads a start-up called Argos Fund Managers. He reckons the regulatory costs to start a new business in Switzerland that is regulated, offers UCITS funds and is trading, will probably be CHF2m ($2.18m). And those mounting costs have already taken a toll on the industry’s creativity.

"It will affect investors as well because this is ......................

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