More than 20 hedge funds are expected to collapse each year, says Sir Callum McCarthy, chairman of the Financial Services Authority.
With more than 8,000 funds worldwide the failure rate is relatively small at 0.3 percent, says McCarthy. But he called for more transparency in the industry, including information on fees, redemption penalties and other opaque areas.
“Any hedge fund manager, like other asset managers, should disclose these clearly to potential investors,” says McCarthy about the tendency for hedge fund managers to burry costs.
McCarthy also promised to discuss relaxing certain rules in 2007 because it has been “increasingly anomalous” that UK retail investors have been prevented from investing in funds of hedge funds.