Hedge Funds Canada

The popularity of overtime and the crowd growing investor in the hedge fund industry has increased the need to increase the degree of market regulation of hedge funds.

Hedge funds are very similar to mutual funds, except that there are fewer regulations on hedge funds. As a result hedge funds requires a much larger investment. Hedge funds are very reluctant is that they are private, between individuals, and should not be brought to the attention of the government or other companies. This allows hedge funds to protect from regulation as mutual funds have to comply. For this reason large companies to move undisclosed amounts of money and gain significantly without authorities noticing. The discreet nature of hedge funds makes them look suspicious and led to many fears in the minds of investors, such as these funds are unethical, speculative and risky. Similarly, high prices and outrageous amount of money necessary for their initial purchase makes people think that investors are hood is the wink of an eye by putting money into these funds. Only ensuring a high degree of transparency in the functioning of the hedge fund industry and the investor knows exactly where his money goes can erase these fears.

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In addition, better regulation will produce more responsible managers of hedge funds in the future and investors would be able to simply search the bottom of a hedge fund manager before entrusting their money in his hands.

Another negative aspect of the unregulated hedge funds is that there are no official statistics of hedge funds. Most owners of hedge funds are big business and, therefore, little is known about their financial movements. Hedge funds are based in offshore jurisdictions, making them look even more suspicious. For example, unlike mutual funds that have a basis in major cities like New York, hedge funds are based in places like Bermuda, the Cayman Islands and Virgin Islands.

Hedge funds also have a higher failure rate than traditional funds. Many of them fail by the second or third year of operation. It has been estimated that approximately 5.7% of the existing 8,500 hedge funds closed in 2005. This vulnerability to the rapid decline that can be harmful and can lead to sudden losses can be reduced by using regulations.

In London, the techniques used to hedge funds operating from there, took the trouble to the Financial Services Authority. Therefore, to verify the proper functioning of this industry, the FSA has now decided to start regulating hedge funds and their managers. In addition, a cover unit of the Special Fund was established to determine how the hedge fund industry in London was estimated at £ 500 billion, can be better controlled.

However, the Canadian Securities Administrators, which is the umbrella organization for provincial securities commissions in Canada decided that the current rules for investment vehicles that are sufficient to regulate the growth of Canadian investment coverage ($ 30 billion industry). This implies that rules and regulations will be established specifically for hedge funds in Canada.

Thus, with the appropriate regulations in place, the clouds of suspicion and uncertainty hanging over the hedge fund industry will certainly clarify and pave the way for a market hedge funds much more sure to attract a greater number of investors.