Hedge funds still facing liquidity restraints from dealer groups
Investor demand for alternative investment is growing, but fund of hedge fund managers continue to face liquidity restraints from dealer groups.
Addressing a panel discussion at the Alternative Investment Management Association (AIMA) Australian Hedge Fund forum, Caravel Consulting Services managing director Mathew Jeremy said dealer groups were still "gun-shy" when it came to alternatives due largely to the collapse of large-scale strategies during the global financial crisis.
"Their business model puts them and their personal liability much more on the line than it does in the superannuation fund world," he said.
The filters governing the approved product lists (APLs) of most dealer groups mean that most hedge funds do not make it through to recommendation, putting considerable strain on the types that can be offered to advisers.
"Retail investors want a true daily liquid product, not just pricing, and they want platform access," Jeremy said.
Select Asset Management chief investment officer Dominic McCormick said the need for liquidity was definitely a barrier that needed to be overcome in order to market to retail investors.
"It's about trying to build a product that can still bring the benefits of the alternatives spectrum, but facing the constraints of our end investors is a big one," he said.
Jeremy said there are strategies that provide liquidity and transparency, but demand is far outstripping supply at the moment and there is a significant opportunity for fund of hedge fund managers to access the retail market in Australia.
"It's in everybody's interest in the industry to meet that equilibrium point," he said.
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