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More investor and manager education needed for newcits to succeed, says Alternative Decisions study

Monday, March 08, 2010
Opalesque Industry Update -
• Three quarters of investors believe the greatest risk to UCITS hedge funds is either performance disappointment or it nor living up to the hype
• Less than a tenth of investors are disappointed with their experience of newcits funds so far
• 44% believe the best way to protect investors and promoters from rogue UCITS Funds is education

Alternative Decisions today announced the findings of Better UCITS Hedge Funds, its first survey and industry best practice guide on UCITS Hedge funds collating opinions from industry leaders. The results show that there is massive UCITS potential but it should be seen as a complement to other funds and not a direct replacement of offshore structures. The technical and distribution challenges warrant fund managers adopting new marketing techniques and understanding their education responsibilities.

For Better UCITS Hedge Funds Alternative Decisions canvassed opinion of European investors, promoters and fund managers to build a picture on the positive and negative sides of UCITS Hedge Funds. The survey results were then debated amongst industry leaders from five European countries to provide firsthand insights and agree best practices for this expanding investment arena. The survey results, opinions and Best Practice guide have been published in Alternative Decisions Library www.alternativedecisions.info for the industry’s to digest.

Lawrie Chandler, Cofounder of Alternative Decisions explained
“The current euphoria for UCITS needs to be married to education and technical know-how. UCITS is a great brand for certain hedge fund strategies but successful asset attraction demands new marketing and distribution techniques.

We caught the spirit around UCITS in the survey and then dialled into the issues with leading practitioners in a boardroom meeting. This is the first time opinions and experience have come together to define the challenges facing UCITS Hedge Funds investors and fund managers.”

Key findings detailed in Better UCITS Hedge Funds include:

• UCITS funds appeal to most investor classes equally, be it retail investors or institutions.
• Suitability of strategies for UCITS is where product developers need to be honest. The risk from financial engineering and shoehorning strategies into UCITS is considerable. .
• Tougher regulation and transparency are here to stay. .
• UCITS is a sister to offshore structures, not a replacement. .
• Understand the ongoing shift in rules and additional operating expenses. Operate within the spirit as well as the rules. .
• Accept duty of care to educate internal stakeholders and investors. .
• Diversify your marketing message away from structure only, otherwise you are open to external contagion if a blow-up happens. .
• Building a UCITS Hedge Fund needs marketing and distribution advice, not just design expertise.


***

The Thought Leadership Series is a collection of European events and guides aimed at improving alternative investor and fund manager knowledge and raising standards in the industry through practical activities, opinion gathering and advice.

Alternative Decisions is a specialist marketing and advisory business. The group assists investors and fund managers in the alternative industry to increase their effectiveness. Alternative Decisions is a subsidiary of eHedge AG is a European based consultant and performance tracker based in Germany. The group was founded in 2000 by bmp Venture Capital and LCF Rothschild among others. Core to eHedge AG is an extensive hedge fund database, which contains performance information on some 2,400 "live" alternative funds from 1,100 investment groups worldwide.


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