Investors warned of lack of liquidity in Ucits hedge funds

These types of investment vehicles have experienced a growing interest by investors looking for more liquid and transparent hedge fund products.

But Sean Molony, senior investment specialist at International Asset Management, questioned whether Ucits always addressed these concerns.

“It’s not widely understood that a lot of Ucits funds include in the small print that they can gate investments for two weeks or even up to a month,” he said.

During the crisis, several hedge funds managers blocked redemptions which left pension funds locked in investments they wanted to drop. As a result, Ucits products tend to be considered in a much more favourable way.

Molony added he was concerned whether the underlying assets of several hedge funds were aligned with their redemption requirements.

Ana Haurie, group chief executive of Dexion Capital, shared his concern. She said the fact Ucits funds have a “regulation stamp” led schemes to think they are “safe” products.

“But they are not," she added. "Schemes still need to do their due diligence. Regulation does not take away the requirement that pension funds have to understand what they invest in.”

Haurie also questioned the concept of transparency, saying that more information is useless if investors do not know what to do with it.

She said: “Take the issue of BP and the losses pension funds suffered. They surely knew they had an exposure to BP, but probably were not fully aware of what it actually meant in terms of risk.”