|Since the economic crisis, many investors have looked for hedge funds which are regulated [GALLO/GETTY]
While many Europeans have been badly affected during the economic crisis, the top 50 hedge fund managers on the continent have seen their assets rise 11 per cent to $300bn, in the 18 months from January 2009.
Newedge, a data service provider, released research on Tuesday showing that funds with stricter European Union liquidity regulations have been prefered by investors looking for safer bets.
Money has surged into Undertakings For Collective Investment Of Transferable Securities (UCITS) funds, a specific type of investment vehicle regulated by the EU. UCITS funds face scrutiny from the EU, unlike some other investment vehicles.
Strict liquidity requirements
UCITS impose stricter liquidity requirements, meaning that the fund must keep more money on hand in case investors want to pull out their investments.
They also have clear asset pricing and debt interest obligation limits, which make them more stable during market fluctuations.
Funds including BlackRock, Dexia, M&G have been among the biggest UCITS asset gainers.
BlackRock, which manages more than $3 trillion, saw its hedge fund assets leap more than 27 per cent to $21.7 bn. Its UCITS-compliant BlackRock UK Absolute Alpha proved particularly popular among European clients.
"UCITS hedge funds will give up a portion of their performance because they have to be more liquid," Ludovic Ferras, an official at Dexia's asset management arm, said.
"But investors would also be wise to base their analysis on liquidity, risk and return rather than just risk-return to gauge performance," Ferras said.
Hedge fund strategies maintaining extra liquidity can now be structured into funds that offer sufficient protection to retail investors, helping to swell hedge fund assets, Ferras said.
Hedge funds typically have less liquidity than other investment funds, as they seek to provide a return over a specific period of time during which shares cannot be sold.