ifaonline.co.uk – HEDGE FUNDS should no longer be taboo for retail investors the European commission is likely to rule this year, reports The Guardian.
According to the paper, the commission will say hedge funds should pose little or no risk to financial stability and should receive only “light-touch” regulation.
The commission yesterday published a report from hedge fund practioners including Gartmore, RAB Capital and Goldman Sachs in the UK, which makes a “strong” case, according to Brussels, that the industry has made “a positive contribution to sound functioning of financial markets without receiving intensive scrutiny/oversight from regulators.”
The majority of a group of hedge fund managers, representing an industry worth $325bn in the EU and $1.3trn globally, told the commission it should enable small investors with at least €50,000 assets to put their money into their high-yield funds and encourage the growth of a pan-European sector. A sizeable minority opted for a higher income threshold.
The initially favourable response from within the commission contrasts with the recent dire warning from the European Central Bank that hedge funds were a “major risk” for financial stability as they tended to invest along similar lines.
But the report, which aims to demystify their role, insists hedge funds provide markets with liquidity and spread risks across a range of investors.
It also pointed out high net worth individuals – traditionally the main investors in hedge funds – now account for just 44% of hedge fund assets, compared with 62% in 1996, while professional and institutional investors, such as pension funds, now account for 56%.
