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BGI to EU: Let us sell retail hedge funds

Apr 3rd, 2007 | Filed under: Hedge Fund Regulation

BGI, arguably the inventors of the index fund, have told European securities regulators they want to get into the retail hedge fund business. According to a Bloomberg report yesterday, the firm (which controls over half of the US ETF market) believes mutual funds should be able to invest in hedge fund index linked derivatives just like they do with equity index linked securities such as ETFs.

The man responsible for regulatory matters pertaining to index-linked funds at BGI, Stephane Kuzmin, told a Paris meeting of the Committee of European Securities Regulators (background paper on the hearings):

“We’d welcome to have some hedge-fund indices available.”

European mutual funds manage approximately US$7 trillion. So not surprisingly, providers of investable hedge fund indices took a shine to the idea. Oliver Schupp, president of Credit Suisse Tremont Index LLC told the committee:

“We should really treat equally hedge-fund indices [and] other indices.”

As we’ve reported here before, it seems BGI has its sights set beyond beta. In November, Blake Grossman, BGI CEO told FT of the “artificial distinction between hedge funds and long-only funds”. Said Grossman:

“The notion that there is a traditional way of investing that is long only, and then there is hedge funds, is crazy. We’re seeing real convergence. We’re getting mandates to employ some degree of short-selling, some degree of derivatives . . . If you look out five years, there will be much less of a divide between what’s considered a hedge fund and what’s considered a traditional strategy.”

In what might someday be looked back upon as an apropos slip, Bloomberg’s article on the European hearings described BGI as “the hedge fund arm of Barclays plc“.