A greater knowledge of hedge funds among investors and advisers is needed to enable a well-functioning retail market for the products, according to Datamonitor.
With the FSA currently reviewing the ban on marketing hedge funds to retail investors, Datamonitor says regulatory reform is only the first step in enabling the wider use of the asset class.
Datamonitor’s latest report on the UK hedge fund market predicts the UK onshore market will grown from €8.5bn in 2007 to €50bn by 2012.
However, the report suggests educating investors and their advisers is a key part in opening up the market and attracting significant retail funds.
Susan Ellis, financial services analyst at Datamonitor, comments: “With the launch of funds of hedge funds onto the retail market in the UK moving closer, an educational process needs to be high on the agenda for asset managers and advisors in order for growth in the retail market to follow the regulatory changes.”
She claims the ban on hedge fund marketing in the UK has resulted in a knowledge deficit among retail investors and advisers, who have an inadequate understanding of the market.
Ellis suggests that large asset management firms with an established retail presence will be the best placed to service the mass market with advice on fund of hedge funds.
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