A Flood Hedge Funds for Individual Investors on the Way

Investing

Published: July 2, 2013 11:50 am

Last Updated: July 2, 2013 12:03 pm

The world of hedge funds and active management is on the verge of a serious change as far as Joe Public is concerned. The U.S. Securities and Exchange Commission is on the verge of allowing hedge funds to start advertising to the public, but this is after the hedge fund industry’s returns have had lackluster returns against the broader markets. After a recent round was raised by Goldman Sachs for a variation of hedge funds for retail investors, it now seems as though many investment banking firms are preparing to launch similar funds that would be hedge funds for retail investors.

In the past it was always said that the little investor could not get access to the great private client or institutional money managers. This has been changing of late, and even more actively managed ETFs and other exchange-traded products have come out.

CNBC said that several investment banking firms are ready to chase Goldman Sachs for hedge funds for retail investors, with minimum accounts as low as $1,000 for starting out. They cited Merrill Lynch and UBS, and we have had discussions with someone at BofA/Merrill Lynch who said that the launch of hedge funds for retail investors is probably nothing more than a short time away now. The banks and brokerage firms have been on the fence about this notion of hedge funds for retail investors due to suitability and other issues, but now that the precedent has been set it is not being considered with as much skepticism and scrutiny by the compliance departments. Be advised that Bloomberg recently addressed how even ETFs can have surprises when it comes to tracking benchmarks when markets are under stress.

The old saying is that you either have to make a million bucks from one person or you have to make one buck from a million people. Institutions and high net worth investors have had access to hedge funds for about four decades now. It only seems fair that the little guy in today’s ease of accounting can access hedge funds too. What the little guy is unlikely ever to get in the same manner is regular or quasi-regular updates from the fund managers.

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