The Securities and Futures Commission is unlikely to impose minimum investment requirements on buyers of hedge funds that have a guaranteed capital return. The commission would still impose minimum investment requirements on buyers of hedge funds considered more risky, according to sources. The minimum investment requirement is designed to price retail investors out of the riskier products so that only experienced, professional investors can trade them. Sources told the Business Post that the SFC was likely to introduce a minimum investment level of US$10,000 for funds-of-funds, and US$50,000 for single hedge funds. The SFC is expected to unveil the new regulations early next month. At the same time, fund houses will be allowed to apply to the commission to sell hedge funds to retail investors. Hedge funds are popular in many overseas markets. More than 4,000 are trading globally with a combined value of US$450 billion. Hedge funds can be sold only to institutional investors. Last year, the SFC issued a consultation paper proposing new rules to allow fund houses to sell hedge funds to retail investors. It proposed a minimum investment level to discourage the smallest investors from entering the risky market. The SFC received 36 responses. The majority did not want the commission to apply an across-the-board approach to hedge fund regulation. Instead, they lobbied the SFC to apply different regulations to different kinds of hedge funds carrying different levels of risk. One hedge fund manager said: 'The risks for investors who purchase guaranteed products would be minimal as the fund houses would promise the investors could get their principal back. It is appropriate for the SFC not to set any minimum investment restriction on the guarantee capital hedge funds.' For hedge funds which invest in a basket of funds, the so-called funds-of-funds, the minimum investment requirement would be US$10,000, the fund manager said. Some commentators supported the idea that funds-of-funds should have less stringent regulations because fund managers, in creating the basket, had already selected suitable single hedge funds for retail investors. Funds-of-funds are also able to diversify risk. The original SFC consultation paper suggested fund houses wanting to launch new hedge funds should have US$100 million worth of hedge funds already under management and have five years experience in managing hedge funds. The SFC is expected to drop this proposed requirement. Many international and local finance houses, including Dresdner RCM Global Investors, Sun Hung Kai Financial Management and Man Investment said they planned to launch hedge funds in Hong Kong.