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Thursday, 13th August 2020
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Retail hedge funds likely to appear on Irish market in medium-term Back  
Ireland looks likely to follow the lead set by Germany and the UK by offering retail investors the chance to buy into hedge funds for the first time.
Leading figures in the Irish investment management industry believe that Ireland will follow in the footsteps of other countries in the medium term by giving retail investors an opportunity to buy into hedge funds for the first time.

Brian Gray, Goodbody Stockbroker’s chief investment officer, said that the individual Irish investor should be able to buy into hedge funds in Ireland in the medium-term rather than in the near future. ‘It will be an evolution rather than a revolution. There is a slow trend in that direction. As the pace picks up in the institutional market, we’ll see growth in the retail market,’ Gray told FINANCE magazine.

The UK and Germany are already offering hedge funds to retail clients. In 2004, Germany introduced new regulations that allowed asset managers to sell hedge funds to retail investors. Deutsche Bank now offers German retail investors the chance to buy into a hedge fund from as little as E124. Individual investors can opt for either Deutsche Bank’s ‘Hedge Long-Short Equity Market Neutral Fund’ or its ‘Hedge Long-Short Equity Opportunistic Fund’. The market neutral fund has equal long and short positions whereas the opportunistic fund can bet on rising markets by taking more long positions or on falling markets by taking more short positions.

Last month, Barclays Plc, the third largest bank in the UK, offered its retail clients an opportunity to invest in hedge funds for the first time. The fund offered to individual investors by Barclays is managed by London based Fortune Asset Management. The minimum investment required is considerably higher than in Germany and stands at £7,000.

The Financial Services Authority in Britain is currently reviewing its rules on the sale of hedge funds. In a statement in October, the FSA said that asset management companies supported the sale of hedge funds to individuals. The current review of FSA policy was prompted in part by the fact that investors can now buy hedge funds from other European jurisdictions over the internet. However, some reluctance remains amongst regulators regarding the purchase of hedge funds by individuals, and there is a fear that the products are too complicated for the average investor.

David Hogarty, head of consultant relationships with KBC Asset Management, said that already Irish retail investors can avail of a similar opportunity via a UCITS fund. This is a legal form of a unit fund and is the vehicle of choice of EU regulators, according to Hogarty. He said that these funds require no minimum investment and are quite liquid. He thinks that this type of product will give returns in the region of 8 per cent and the prospect of consistent returns, as opposed to a high risk-high reward structure, will attract a new type of investor.

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