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AIMA RESPONDS TO WIDER-RANGE RETAIL INVESTMENT PRODUCTS


Date: Friday, October 28, 2005
Author: AIMA

Alternative Investment Management Association

The Alternative Investment Management Association Ltd Meadows House, 20-22 Queen Street, London W1J 5PR Tel: +44 (0)20 7659 9920 Fax: +44 (0)20 7659 9921 E-mail: info@aima.org www.aima.org AIMA RESPONDS TO WIDER-RANGE RETAIL INVESTMENT PRODUCTS DISCUSSION PAPER FROM FINANCIAL SERVICES AUTHORITY (UK)

LONDON, 28TH 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.

AIMA’s full response may be seen here - www.aima.org/uploads/AIMAResponsetoDP05.3-28Oct.pdf. AIMA will await the FSA’s consideration of all responses to DP05/3 and its Feedback Statement before making any further comment.

AIMA has also responded to the separate FSA paper, DP05/4, "Hedge Funds: a discussion of risk and regulatory engagement" and a separate Release has been issued on that.

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About AIMA

Founded in 1990, AIMA is a not-for-profit global trade association with corporate membership in 46 countries, including over 270 in the UK. AIMA focuses specifically on hedge funds, managed futures and managed currency funds. More than 920 corporate members (comprising 3000 individuals) enable the Association to create global tools for the benefit of its members, institutional investors and regulators. Its objectives are to increase investor education, transparency and promote due diligence and related sound practices, and to work closely with regulators and interested parties in order to promote the responsible use of alternative investments. AIMA’s membership includes fund of funds managers, institutional investors, hedge fund managers, prime brokers, exchanges, fund administrators, auditors, lawyers and other specialist service providers. Please visit us at www.AIMA.org.

For further information, please contact Emma Mugridge, AIMA, emugridge@aima.org or tel +44 (0)20 7659 9920.