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IMA warns the FSA to hedge on retail fund offerings

The Investment Manage-ment Association is warning the FSA not to allow a wide range of hedge funds to be authorised for sale to retail investors.

In its response to the regulator&#39s discussion paper Hedge Funds and the FSA, the IMA says the balance of view among fund managers is that it would be premature for a host of hedge funds to be made readily available to retail investors.

It says there is unlikely to be enough demand to justify a wholesale liberalisation of the regime but wants the regulator to investigate allowing regulated onshore hedge funds for institutional investors as there is growing interest in this area.

Eventually, it believes demand among retail investors would grow once the institutional market for hedge funds takes off.

For this to happen, however, the IMA believes there needs to be a change in the existing tax regime.

Under current regulations, onshore hedge funds would be subject to annual capital gains tax and when investors sell their stake in funds, which the IMA fears would deter providers from coming onshore.

Director of regulation and tax Julie Patterson says: “The IMA believes it would be premature to allow a wide range of hedge funds to be authorised for sale to retail investors but there is increasing demand from institutional investors and private clients, to which the UK should respond.”

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