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November 1, 2005
Hedge funds headed to a high street near you
Consumers will be able to invest in hedge funds through their high-street banks under proposals being considered by the Financial Services Authority (FSA).
Currently, hedge funds, which are estimated to manage about $1 trillion (£560bn, E830bn), are regarded as an investment option open to institutions or rich individuals. Such a move could allow individuals to invest in hedge funds through their high-street bank and to have hedge fund holdings through their ISAs or Sipps.
After consultation, which closed on Friday, the FSA, Britain’s financial watchdog, has created a specialist unit that will supervise hedge-fund managers more closely. It wants to bring regulations up-to-date with those associated with traditional fund managers and open up the lucrative market to a wider base of potential investors. A source close to the process said: “Expectations are high. The FSA could truly swing the door open for hedge funds.”
Britain has the largest hedge-fund investment in Europe and the FSA is increasingly recognising the importance of hedge funds to financial markets. But at the same time the regulator is concerned about the apparent regulatory vacuum in which they operate and wants to create a safer market.
The watchdog views the high commissions paid by hedge funds to counterparties, together with light regulatory oversight, as an environment ripe for market abuse. Hector Sants, an FSA official. recently said: “Some hedge funds are testing the boundaries of acceptable practice.”
-The Business Online-
Posted by su at November 1, 2005 1:40 PM