Is the hedge fund market opening up to retail investors?
Financial products
Posted by MoneyController on 17.05.2023
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Until now, the hedge fund market has been inaccessible to small investors and savers. A new Ucits fund gives this type of investor a small way to invest indirectly in hedge funds (see also Return, risk and costs: three essential criteria for choosing the best fund for you).
Hedge funds or speculative funds are financial products that are not aimed at retail investors for various reasons, such as the minimum investment amount (500,000 euros), the investor's capital requirements and the high average risk. However, in "Affari&Finanza" of "La Repubblica", Sibilla Di Palma writes about the arrival on the market of a product that could represent the approach of the hedge fund constellation to small investors: it is the Ucits iMgp Dbi Managed Futures, a fund launched by Dynamic Beta Investments and iM Global Partner.
The unique feature of this fund is that it replicates the returns of twenty hedge funds investing in actively managed managed futures. The Ucits iMgp Dbi Managed Futures Fund also uses derivative contracts to replicate the performance of the basket of hedge funds.
As Di Palma explains, the fund's Ucits classification is the prerequisite for allowing small investors to buy fund shares. The reason for this is that these funds must comply with precise rules laid down in Directive 2009/65/EC of the European Parliament. The European regulation prohibits these funds from some of the riskier management practices that characterise them, such as leverage, short selling, concentration in illiquid assets and more.
This type of fund then tries to combine the diversification advantage offered by managed futures funds with the low commission costs typical of ETFs: as the co-founder of Dynamic Beta Investments explains, the aim is to reduce volatility without the commissions affecting the returns of the financial instrument too much (the fund's commission is 0.75% per annum). In fact, as Di Palma points out (stressing the importance of the professionalism of the managers to whom clients turn), costs are one of the disadvantages of hedge funds, given that they have returned an average of 2% per year over the last fifteen years, according to the Hedge Fund Research database.
Read also:
Return, risk and costs: three essential criteria for choosing the best fund for you