AIMA says hedge funds do not need tighter regulation

Responding to the UK Financial Services Authority's (FSA) recent discussion paper on hedge funds, the Alternative Investment Management Association (AIMA) has said that no evidence has been offered to suggest that hedge fund managers are likely to cause any more disruption to the market than other players.

Released in June, the UK FSA's paper warned that the hedge fund industry was especially risky, becuase it is less mature, growing rapidly, and employing sophisticated investment techniques – often in new and developing markets, asset classes and products.

AIMA today rejected the suggestion that standards of systems and controls, compliance and risk management are somehow lower among hedge fund managers than other, more highly regulated firms. In fact, AIMA claimed, many hedge funds were ahead of traditional asset managers in terms of system development.

The association also denied that the hedge fund market in general, and the UK segment in particular, was especially prone to fraud. "There is no apparent evidence of a higher level of fraud within the industry than elsewhere," AIMA said.

However, AIMA's response came the day after the Wall Street Journal ran a story claiming that investigations by the UK FSA into the alleged misuse of private information around convertible bond deals had brought the regulator's focus squarely onto a large UK-based hedge fund.