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Private Client Demand Accelerating in Europe

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DUBLIN, Ireland–Research indicates that regulators are holding up the adoption by investors of hedge funds in Europe, while demand for absolute return strategies is on the rise.

The report, “The Future of the Private Client Market for Hedge Funds in Europe,” covers the areas of regulation, performance, fees, valuation, disclosure and distribution.

According to a report from Research and Markets, an international market data company, 39% of European wealth managers see regulatory difficulties as a “major barrier” to hedge fund investing.

In light of recent regulatory debates in Germany, the barrier seems evident. The view, though, is that the popularity of hedge fund investments might force regulators to review the situation in Europe, with legislative changes already occurring, according to Research and Markets.

In its report, researchers cover trends in France, Germany, Italy, Spain and the United Kingdom. Officials predict that if regulatory changes allowing wider distribution pass it would help drive growth in the high-net-worth market of more than 20% a year through 2007.

The estimated size of the European high-net-worth hedge fund investment market is 60 billion euro (US$73 billion) as of 2003. That figure is thought to represent 75% of European hedge funds.

Of the wealth managers interviewed for the report, 70% saw increasing diversification or the gain of absolute returns as the primary reasons for investing in hedge funds.

Still investors are keeping one eye on the markets. Should equity markets show a period of sustained growth, hedge fund adoption could slow down, wealth managers said.

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