Speaking at an alternative investments workshop in Auckland yesterday, Griffiths says bodies such as the Securities and Exchange Commission (SEC) in the United States and the Australian Prudential Regulatory Authority (APRA) are starting to recognise the useful role hedge funds can play in a portfolio.
He says the SEC, which has been conducting “the most rigorous review of the industry yet” has changed its point of view considerably.
"It is now focussed on how to ensure (that) the ordinary investor can get access to such funds."
"One commissioner has said that rather than cracking down on hedge funds the SEC may need to consider loosening the rules that govern mutual funds."
In Australia APRA recognise that there may be a place for hedge funds and other alternative investments in portfolios, however the people making the decision to use these funds need to carefully consider the risks associated with these products.
APRA’s main concern about hedge funds is that investors may not have conducted sufficient due diligence and they may not understand the risks involved with these funds.
It has listed the 10 key elements that they expect investors (or advisers and trustees) need to ask.
Griffiths says these guidelines are useful, however they maybe too prescriptive and fail to recognise the need for flexibility in strategies adopted.
Regulators have provided no guidance to the appropriate allocation to hedge funds, Griffiths says.
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