In Italy, funds of hedge funds have nearly booted single-manager hedge funds out of the market, according to the Alternative Investment Management Association and Simmons and Simmons. The study found that 97% of hedge fund assets in the country are in FoHFs, with just 3% for the singles, and for good reason. Massimo Maurelli, chief investment officer at Capitalgest, told Global Investors, “There is a lack of expertise in the area and the market isn’t used to shorting stocks and using derivatives.” In addition, Maurelli says, there is little competition in the market, as 80% of the asset management industry is run by banks, making it difficult for upstart firms to attract clients. An additional problem with growing the hedge fund industry in Italy is tight regulation, which is seen as tougher than other European Union member states. For one, there is a 200 investment limit per fund, which means once the cap is reached, a new fund has to be formed, boosting expenses and creating headaches for management. What’s more, there is a minimum investment that applies equally to single-manager funds and FoHFs, thus limiting participation in a hedge fund industry that has a little more than €3 18.3 billion (US$405.5 billion) in assets.
