F&C welcomes proposals to allow greater access to alternative assets

Leading fund group F&C Investments has welcomed this week's announcement from the Financial Services Authority proposing to widen the access to hedge funds and other alternative investments through the development of Funds of Alternative Investment Funds (FAIFs).

Speaking at a press briefing to discuss the launch of the F&C Event Driven Fund, a fund of hedge funds which, subject to the approval of the UK Listing Authority, F&C intends to list in May, Francois Barthelemy of F&C Partners, said: "Hedge funds are widely misunderstood and often portrayed as very high risk investments. While the hedge fund universe now contains a wide range of strategies, rightly speaking the goal of hedge funds should be to mitigate any risks arising from market movements and to deliver absolute returns, whatever the overall markets are doing. Whilst more sophisticated high net worth individuals and institutional investors have reaped the rewards from hedge fund investment for almost six decades, retail customers have lost out and been largely confined to investments which are fully exposed to market volatility. In our view there is certainly a place for hedge funds in the portfolios of retail investors."

"However, there is no doubt that these investments do use more sophisticated techniques than traditional long-only retail funds. It is therefore essential that retail investors not only take professional advice before committing money but that they also invest in vehicles managed by specialists who have the expertise to do the necessary research and due diligence. In this respect, funds of hedge funds are likely to be the most appropriate route for the retail investor," added Barthelemy.

F&C, which manages funds of hedge funds through F&C Partners, has recently begun the pre-marketing of a closed-ended fund of hedge funds, the F&C Event Driven Fund, which is being targeted at institutional investors, discretionary private client portfolio managers and investment intermediaries. The Fund will invest in a portfolio of 20-40 hedge funds from the 'event driven' category which includes funds that get involved with mergers, takeovers, IPOs, distressed securities and other exceptional events which Barthelemy points out "are largely unaffected by the general movement of the stock market".

"While FAIFs will be a welcome development in improving access to hedge funds, closed-ended listed funds of hedge funds remain a very attractive way of accessing these types of investments. Closed-ended companies, which can be traded openly on the market, are well-suited to illiquid underlying asset classes such as property, private equity and hedge funds and their oversight by independent Boards gives shareholders additional comfort that their interests are being looked after," concluded Barthelemy.