Fri, Aug 1, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

ASIC achieves defining moment on hedge funds

Thursday, November 07, 2013

A note from Australia's Lexology reported on the Australian Securities and Investments Commission (ASIC) long-awaited changes to the definition of a 'hedge fund' (and 'fund of hedge funds') for the purposes of determining the application of the shorter Product Disclosure Statement (PDS) regime, and the application of enhanced PDS disclosure under ASIC Regulatory Guide RG240. The firm writes that the original 'hedge fund' definition was unclear and too broad which had the unintended consequence of capturing many types of funds that should not have be treated as hedge funds.

Alex Wise, Head of Fund Services at Select Asset Management comments: "Initially the definition was wide enough to catch many equities managers who consider themselves active or long only, the new draft has gone a long way to address some of these issues".

Lexology comments that the troubled history of this definition is reflected in the number of delays in its finalisation. "The shorter PDS regime applying to simple managed investment products commenced on 22 June 2012. At the last minute, ASIC issued interim relief to exclude 'hedge funds' from the application of the shorter PDS regime and to allow those 'hedge funds' that had prepared shorter PDSs until 22 June 2013 to transition back to a long form PDS."

Wise says:  "For many years disclosures of hedge fund strategies to retail investors have fallen significantly below what is disclosed offshore.  The additional disclosure is good news for retail investors who want to allocate to hedge funds.  The disclosures encompass many standard disclosures that offshore funds include, including some very simple things like "who is the administrator".

The transition date had to be extended to 1 February 2014 as it became clear that the original definition of 'hedge fund' was too broad and unworkable. ASIC has since consulted significantly and widely with industry to refine the definition.  It is intended that that the re-worked definition of 'hedge fund' will allow the more accurate targeting of the types of funds which pose more complex risks for investors. As ASIC Commissioner Greg Tanzer stated, "Our changes will benefit the industry by relieving some lower-risk funds from the more extensive disclosure obligations imposed on a hedge fund."

"ASIC have done a pretty good job, there's still some strange guidance such as; if you mention the word "hedge fund" anywhere in any marketing materials you are automatically a hedge fund! But on the whole the disclosure will be welcomed by retail investors" Wise says.

Aussie law firm Hall and Wilcox has published a table listing the principal differences between the old and new definition. Source.

Wise concludes: "There is still a strong market for retail hedge funds in Australia due to sophistication at certain advisors and planners.  The key factor for offshore managers wishing to set up in Australia will be working with experienced partners in retail alternatives".

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
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. Opalesque Exclusive: Kyria Capital Management bets on women hedge fund managers[more]

    Bailey McCann, Opalesque New York: As hedge fund assets top $3 trillion, and long/short strategies get more crowded than ever, with every manager hunting for even the tiniest bit of alpha, a new firm has emerged that claims its own edge – women. A recent Rothstein Kass study showed women-owned a

  2. Hedge fund manager Winton Capital making headway with long-only strategy[more]

    From PIonline.com: North American investors are helping Winton Capital Management Ltd. make progress — albeit slowly — toward its founder's goal of becoming a $100 billion company. The firm's ticket to quadrupling its assets under management is unlikely to be one of its scientifically designed manag

  3. Opalesque Roundtable: Success in hedge fund marketing not linked to performance, but investor appetite[more]

    Komfie Manalo, Opalesque Asia: Success in marketing a fund is not linked to the performance, but to investor appetite, to the way you can market the fund, and to how much time you can spend to raise assets, said Antoine Rolland, the CEO of incubator and seeding firm

  4. Opalesque Radio: Now is a good time to buy protection cheaply in the options market[more]

    Benedicte Gravrand, Opalesque Geneva: Investors are showing an increased interest in risk parity funds and strategies, Opalesque reported last year. Risk parity strategies have the

  5. The Big Picture: Charlemagne Capital smoothes risk out of frontier market investing with portfolio approach[more]

    Benedicte Gravrand, Opalesque Geneva: Opalesque recently talked to one of the portfolio managers of the Oaks funds, which are emerging and frontier market hedge funds focusing on equity long/short with a directional approach. They are run by