HEDGE FUNDS should no longer be taboo for retail investors the European commission is likely to rule this year, reports The Guardian .
According to the paper, the commission will say hedge funds should pose little or no risk to financial stability and should receive only "light-touch" regulation.
The commission yesterday published a report from hedge fund practioners including Gartmore, RAB Capital and Goldman Sachs in the UK, which makes a "strong" case, according to Brussels, that the industry has made "a positive contribution to sound functioning of financial markets without receiving intensive scrutiny/oversight from regulators."
The majority of a group of hedge fund managers, representing an industry worth $325bn in the EU and $1.3trn globally, told the commission it should enable small investors with at least €50,000 assets to put their money into their high-yield funds and encourage the growth of a pan-European sector. A sizeable minority opted for a higher income threshold.
The initially favourable response from within the commission contrasts with the recent dire warning from the European Central Bank that hedge funds were a "major risk" for financial stability as they tended to invest along similar lines.
But the report, which aims to demystify their role, insists hedge funds provide markets with liquidity and spread risks across a range of investors.
It also pointed out high net worth individuals - traditionally the main investors in hedge funds - now account for just 44% of hedge fund assets, compared with 62% in 1996, while professional and institutional investors, such as pension funds, now account for 56%.
PROVIDENT FINANCIAL, the doorstep lender, is to demerge its fast-growing international business next spring in a bid to unlock value for shareholders, reports The Daily Telegraph.
The decision, announced in a trading statement yesterday, comes after Provident first floated the idea of a demerger of the international business at its full-year results in March.
Robin Ashton, the chief executive, is quoted as saying: "We believe the demerger will add value and allow the international growth opportunity to be captured more quickly."
The international division was started in Poland in 1997. It now operates in Hungary, the Czech Republic, Slovakia and Mexico, while a Romanian operation was launched in April.
The division reported a 28% rise in pre-tax profits last year and now accounts for 32% of Provident's revenues and around a quarter of group profits. Provident said the demerger plan is still at an early stage and promised to update the market at its interim results in September.
ASSETS HANDLED by fund managers in the UK have soared by 30% to more than £3trn in the past 18 months, earning the City about £8bn in fees, says The Times.
Richard Saunders, of the Investment Management Association, which compiled the figures, said as much money was managed in the UK as in the whole of the rest of Europe.
He is quoted as saying: “The asset management industry located in the UK is not about intermediating between UK companies and UK savers. It’s a global business and London is a global centre. It’s in the interests of the Treasury and the City to keep it that way.”
But with the top ten firms, led by Barclays Global Investors, continuing to dominate nearly half the market, there is little sign competition is driving down fees.
The IMA’s finding that fund managers are typically charging 0.28% of assets under management — equivalent to about £8bn a year — also raised eyebrows in some quarters.
And despite a shift from equities to bonds as pension funds attempt to match their liabilities more closely with their assets, the proportion of shares in most portfolios has remained stuck at 51%.
Saunders said his calculations showed about £30bn to £40bn had moved into bonds, a similar amount as in its previous survey, but the rise in share prices had offset the switch.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
'Damage is done at the moment the pension is transferred...'
'Visibly trawling for prospective clients'
‘Effectively the norm’
20 years experience in multi-asset