01/06/2010 Author: Shannon Hawthorne

Aima hits back at ESMT report

The report, which looked at the performance of 1,543 hedge funds over a 10-year period, concludes that many investors will chase performance “at all costs” which could leave them “vulnerable and unprotected”.

“This is exacerbated at the individual fund level by the opacity and lack of regulation of the sector, which already means that there are significant discrepancies in the level and quality of information reported,” said Guillermo Baquero, assistant professor at the ESMT.

However, Andrew Baker, CEO of Aima, has called the accuracy of these findings into question. “The authors imply that regulation should be solely about investor protection, when its bigger aim should be about reducing systemic risk – in the case of our industry this means hedge fund manager authorisation and systemic risk reporting, measures that the industry supports,” said Andrew Baker, CEO of the association.

“[It also] contradicts the findings of weightier investigations into the financial crisis and systemic risk, such as those by Jacques de Larosière, Lord Turner and the FSA, which identified no material contribution to systemic risk from hedge funds,” he adds.

Bakers also points to the “numerous reports” that have found that hedge funds offer superior risk-reward ratios compared to other asset classes.