Financial Risk Management (FRM) has defended the hedge fund investment model and said most problems investors experienced during the global financial crisis were caused by poor product design.
"The hedge fund investment model is not broken, but Australian investors have suffered from product flaws," FRM Australia chief executive Richard Keary said yesterday.
Keary said many hedge fund products lacked transparency and liquidity, while their complexity meant many investors did not understand the vehicle they invested in.
"Lessons learned from the credit crisis and from the ensuing financial crisis have greatly altered what kinds of products investors want and how they intend to invest," he said.
FRM yesterday announced the launch of its first fund in Australia, the FRM Sigma Fund, with which the firm hopes to build a presence in the wholesale investor market.
Keary said the wholesale investor was one of the most important segments for hedge funds in a market dominated by platforms.
The fund invests in seven commodity trading advisers that specialise in managed futures.
The underlying strategy has been run in the United States since 2005.
Zenith Investment Partners yesterday awarded a highly recommended rating to the fund, while Lonsec gave it a recommended rating late last year.
The fund has already attracted $25 million in funds under management.
Keary said over time the fund might look at introducing a long-short strategy, but it would not launch many strategies.
"There is not an endless list of hedge fund products that you can launch into the market," he said.
FRM manages globally more than $9 billion in funds for institutional and sophisticated advisers.
