UCITS Hedge Funds Proliferate, Now Manage US$35B

Feb 10 2010 | 11:01am ET

Call it the industry fear built: Starting from almost nothing two years ago, the European onshore hedge fund industry has ballooned to more than US$35 billion, as fearful investors flock to more highly-regulated investment vehicles and hedge fund firms flock to launch regulation-proof offerings in advance of new European hedge fund rules.

According to Hedge Fund Research, more than 200 UCITS III-compliant hedge funds have debuted over the past 18 to 24 months. UCITS III funds, which constrained somewhat in their investment strategies and ability to use leverage, are free to be marketed and sold to investors across Europe, and are unlikely to be affected by the strict alternative investments directive making its way through the European Parliament.

“As the structural requirements of institutional investors continue to shape the landscape of the industry, funds conforming to Ucits III guidance have generated a significant amount of interest,” Kenneth Heinz, president of HFR, said. “Ucits III constitutes a compelling and tractable set of guidelines which serve to greatly enhance product transparency, cross-border distribution, and risk control, while at the same time providing an attractive alternative to other regulatory proposals under consideration by various financial regulatory authorities globally.”

Still, the UCITS total is a drop in the bucket of global hedge fund assets: According to HFR, hedge funds globally manage US$1.6 trillion.

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