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Despite attractive risk and return profiles, French hedge funds are struggling to get allocations in investors’ portfolios. Their marketing remains difficult partly due to AMF (Autorité des Marchés Financiers) constraints, French paper Capital reports.

Cold feet Investors have been able to buy into hedge funds for the last 3 years but they have not been in any hurry to do so. They have cold feet with regards to alternative asset management and prefer funds of hedge funds, to limit risks through diversification. Few of them are willing to invest in French hedge funds directly, and notably in Aria EL funds (Agréés à Règles d’Investissement Allégées à Effet de Levier – lightly regulated and leveraged funds). Yet these funds offer good levels of risk transparency since they are not only regulated by the AMF (since Nov. 04) but also by fund managers themselves: few use maximum leverage (assets up to 3 times). Moreover, their investment strategy remains cautious as they generally aim for absolute returns and volatility under 5%.

They will survive Large and small structures rub elbows within a narrow market which may remain as such. Some companies such as Sinopia AM (HSBC Group) are thinking about transforming their Aria EL fund into a fund with a more general outlook, following the AMF’s mellowing of regulations on coordinated funds. “The new regulations may mean that there will be less Aria EL funds” Christine Lacoste of Crédit Agricole Asset......................

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