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November 18, 2006
Funds of Hedge Funds Feel the Amaranth Effect
It looks like Amaranth’s downfall is having a domino effect on all other players in the hedge fund industry. The latest to be affected is the fund of fund market – the International Organization of Securities Commissions (IOSCO) is contemplating revamping the guidelines for this sector.
The rules currently being followed are three years old, having been laid down in 2003; the Amaranth disaster has forced IOSCO to take a closer look at how funds of hedge funds operate, according to Hubert Reynier, chairperson of an investment management committee for IOSCO. Reynier added that this move was initiated by the large number of retail investors in funds of hedge funds in some countries.
A fund of hedge funds invests in more than one hedge fund to provide greater diversification for its clients’ portfolios.
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