Some Hedge Fund Execs. See UCITS Blowup

Jun 17 2010 | 1:05pm ET

Several hedge fund executives are using the GAIM conference to throw cold water on the boom in UCITS III-compliant hedge funds.

“It’s nonsense to create these liquid vehicles,” APG’s Gerlof De Vrij sniffed. “It’s much better to realize that hedge funds are an illiquid asset class.”

GAIM dedicated all of today to UCITS hedge funds, which have attracted some US$200 billion and led to an avalanche of new fund launches or restructurings to meet the requirements. And while most of the doubters were not as dismissive as De Vrij, many expressed concerns about whether some hedge fund strategies really could offer the liquidity that UCITS requires.

“Some strategies are being squeezed into UCITS,” AXA Investment Management’s Aarnout Snouck warned Reuters. “The label UCITS obviously gives a lot of people comfort, but at the end of the day it’s still an investment in hedge funds.”

“About 90% of strategies are fine, but there’s always going to be 10% who push the boundaries,” Olwyn Alexander of PricewaterhouseCoopers said. Man Group CEO Peter Clarke agreed.

“UCITS is an interesting place for certain hedge fund strategies, but by no means all of them,” he said.

Both Snouck and Alexander also warned that the shoehorning of some strategies into UCITS form creates risks.

“If a liquidity mismatch… happens again, it’s likely it will happen in the UCITS space,” Snouck predicted.

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