First, high net worth individuals, once the largest group of investors in hedge funds, grew disillusioned with them after late 2008, when they were dismayed to find they could not take their money out of hedge funds when they wanted to. Second, UCITS III, European regulations on funds, came into force in 2007, allowing managers to sell a version of hedge funds to retail investors.
Hedge fund managers offering UCITS-compliant funds generally refer to them as “UCITS hedge funds”, while mainstream asset managers generally call them “absolute return funds”. Institutional investors have bought UCITS III funds as well as retail investors, attracted by the offer of daily or weekly liquidity; most hedge funds lock up investors’ money for three months.
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