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Italy: Hedge funds not so healthy

The Squadra Azzura won the World Cup last month after a shaky start and by steadily improving their performance. It’s a stark contrast to the development of the Italian hedge fund industry. Italy rode the wave of hedge fund expansion by introducing regulation as early as 1999. As a result, growth has been strong. Italian funds now manage €18.3 billion, more than 5% of total hedge fund assets invested in Europe.

But there is cause for concern. As a survey published in July by the Alternative Investment Management Association and law firm Simmons & Simmons points out, pure hedge funds manage only 3% of the market, with funds of hedge funds claiming the rest. And the bulk of the funds in the collateral are based outside Italy. This means that the notion that there is a burgeoning domestic hedge fund industry in Italy is wrong.

The survey claims to represent the opinions of fund managers holding a combined 82% market share of funds managed in Italy. They list problems and suggested solutions.

FOFs v hedge funds in Italy
The discrepancy between funds
Source: MondoHedge

The most prominent of these is the need for legislation to differentiate between hedge funds and funds of funds In addition, the image of the latter needs to be improved.

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