March 20, 2006

Hedge Funds Laws Might Open to Small Investors

In move that is likely to change the whole hedge funds outlook, the city's financial watchdog is to make way for the hedge funds - as an investment vehicle - available to small retail investors. Once this move goes ahead, hedge funds units could be sold to the small investor community. In the current scenario, it is illegal to market hedge funds to ordinary investors in Britain, but the Financial Services Authority is likely to relax current restrictions. This is expected to happen when it finally publishes its recommendations on the future of the sector.

This is a big move away from the earlier rigid stand at the start of the consultation exercise, which began last year in the month of June. This move would allow fund of hedge funds to be set up in the UK and marketed to ordinary investors as well. But given all this lenience, these onshore hedge funds are likely to come with warnings on their risks. This might prove to be a deterrent for many risk-averse retail investors.

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