AIMA RESPONDS TO WIDER-RANGE RETAIL INVESTMENT PRODUCTS

LONDON, 28^{TH October 2005 - The Alternative Investment Management Association (AIMA), the leading global hedge fund and alternative investment industry association, today issued its response to Discussion Paper DP05/3, "Wider-range Retail Investment Products", issued by the UK Financial Services Authority (FSA) on 23rd June 2005.}

AIMA, in its response to the FSA’s Discussion Paper on the appropriateness of the UK regulatory regime applicable to retail investment products and the question of retail access to products such as hedge funds, hopes that the debate will lead to the establishment of a regime which is both fair to the consumer and allows for the development of innovative products.

It remains true that the majority of AIMA’s members have no interest in retail access as most do not need or want the perceived complications of dealing with retail money. Some members, however, mainly the large traditional fund management groups with experience in the retail market, have been developing more alternative strategies and are interested in further developments in this area. They have the necessary infrastructure and the interest in opening the market to certain hedge fund products, provided of course that the regime under which they would operate is appropriate. It is largely from this sector of AIMA’s membership that the response to the FSA is drawn.

In AIMA’s view, there are still misunderstandings regarding the risk inherent in certain hedge fund products or strategies. Funds of hedge funds, for example, would be a far ‘safer’ investment for a retail consumer than a UCITS III fund which invests in derivatives, particularly where the UCITS manager does not have the same depth of experience in these markets as some hedge fund managers.

Having regard to the FSA’s statutory objective of consumer protection, and the possibility of confusion and mis-selling, AIMA believes that disclosure is the key. Such disclosure should be full, accurate and plain. Both the industry (distributors) and the regulator should share the role of educating investors about the aims or outcome of a product, rather than have regulation applied to the product itself.

AIMA also believes it essential that intermediaries who may sell products to retail consumers fully understand the products they are selling.