Hedge funds may soon be marketed direct to retail investors after an FSA consultation paper asking the industry to comment on plans to make them more accessible.
The paper, Hedge Funds and the FSA, asks the industry for feedback on whether it should be easier to invest in hedge funds to reflect the expansion in the market over the past few years.
Under the current rules, retail investors can only buy into long/short funds through IFAs, who must ensure that clients understand the products and the risks before they to invest in them as a small part of a diversified portfolio.
The news has been cautiously received by IFAs, with many remain unconvinced over the suitability of hedge funds for retail investors. But fund managers say a more liberal regime could see them enter the market.
FSA director of conduct of business standards Michael Folger says: “Just as some of our international counterparts have done recently, we are reviewing our regulatory regime in respect of hedge fund activities in the UK, particularly the sale and marketing of such funds. We come into this with an open mind.”
New Star corporate finance director Ravi Anand says: “It is a step forward but not as far as we had hoped. The FSA only seems to be paying lip service but if there was a change of legislation we would be encouraged to launch our own funds.”