The redemption issue with hedge funds must be tackled if the industry is to avoid falling into mediocrity, says Thames River Capital.
Chief compliance and risk officer Toby Hampden-Acton says if the FSA rules come out and do not allow investors notice periods during which they can redeem, then advisers are going to be channelling investors’ money into funds with less liquidity, which are not necessarily the best funds.
Hampden-Acton said: “Generally speaking, liquidity is worsening in the underlying hedge funds because the successful managers are able to allow people out less frequently. We think there is a danger in that and the industry should allow notice periods, as when you sell an underlying hedge fund you get 90 per cent of the money and have to wait for the audit to be completed to get the last 10 per cent.”
BestInvest head of communications Justin Modray says: “We tend to prefer a notice period purely because it is in black and white without any ambiguity on when you will get your returns.”