IT’S A DILEMMA for regulators. Conventional fund managers have clearly failed retail investors, so should financial watchdogs make it easier for a new breed – hedge fund managers – to woo them? Good hedge funds might do a much better job of properly risk-managed absolute-return investing than the index huggers at the large, established shops. But then hedge funds also have an alarming habit of setting up and closing down a few months later. Are they, in short, suitable managers of retail investors’ money?
Some regulators, such as the Financial Services Authority in the UK, think not.
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