IFG financial planning strategist Donna Bradshaw says advisers may be unable to get through the number of hurdles facing them on using hedge funds.
She believes that despite the FSA consultation on hedge funds, issues over transparency, costs and in-house expertise mean the knowledge gap will be too great for some IFAs and their clients. Bradshaw said there is a worry of a repeat of what happened with tech funds in the 1990s, with advisers following the market fad. She said there is a risk that advisers jump on the hedge fund bandwagon but fail to analyse the value and warned that in the hedge fund sector there are inevitably mediocre managers, as there are in the long-only market.
She said: “Transparency is a particular issue, as the industry is a long way from common ground on hedge funds as managers tend to have their own code which advisers struggle to translate into English.”
New Star director Ravi Anand says: “There are issues on transparency but the question itself of why people should use hedge funds has already been answered as it can add value to a diversified balanced portfolio by offering access to a different asset class.”