European mutual fund managers are pushing regulators to allow them to buy into derivatives of hedge fund indexes.
Approval from regulators would allow European Union-regulated funds to put some of their $7.3 trillion of assets into derivatives tracking the hedge fund indexes, allowing them to profit from hedge fund gains in a safer, regulated way.
Relatively few hedge funds are actually domiciled in European countries, so that although their use has been fairly widespread amongst institutional investors for some time, they have been limited to high net worth individuals able to pay the high minimum initial investments that are often in place.
Fund industry representatives argued in front of the Committee of European Securities Regulators that indexes linked to hedge funds performance have increasingly become standard financial indicators.
Although ruled unsuitable for mutual funds last year, the mutual funds are pushing to be allowed to bet on the performance of hedge funds just as they can for other financial indicators such as stock indexes.
"These are a class of assets that retail investors could benefit from," said Stephane Kuzmin, responsible for regulatory matters for index-linked funds at Barclays Global Investors Ltd., the hedge-fund arm of Barclays Plc, at the hearing. "We'd welcome to have some hedge-fund indices available."
The EU executive agency in Brussels may consider broadening those rights to permit buying of funds of hedge funds when it considers future rule revisions.
European countries including Germany, Spain and the U.K. have permitted limited investment in funds of hedge funds or other means of investing in the vehicles traditionally restricted to institutional investors or people with $1 million or more.
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