Australia Regulator Looks To Redefine 'Hedge Fund'

May 23 2013 | 10:39am ET

Before issuing new transparency guidelines and other regulatory changes, the Australian Securities and Investments Commission is asking an important question: What, exactly, is a hedge fund?

ASIC may tighten its definition of "hedge fund" before new rules on disclosure come into effect on Feb. 1, and it's asking the industry for help. The regulator's move comes in response to concerns that its current definition of hedge fund—any registered managed investment scheme that either calls itself a hedge fund or possesses at least two hedge-fund like characteristics—captures too many funds that are not "true" hedge funds.

Among the main characteristics that ASIC currently looks for are complexity of strategy or structure, the use of debt, derivatives and short-selling, and performance fees.

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