Investments of less than US$50,000 should be allowed, Barep director says Regulations governing hedge funds are too restrictive, which explains why just seven funds targeting retail investors have been launched in Hong Kong since the market was opened up in May last year, a French hedge fund manager said yesterday. The Securities and Futures Commission has been trying to promote hedge funds to retail investors with last year's introduction of rules to allow the products to be sold to small investors. But Bruno Leroy, Asia Pacific director of Barep Asset Management, said a US$50,000 minimum investment requirement kept many retail investors out of hedge funds. 'If you have such a high amount of investment, you should not be seen as a retail investor,' Mr Leroy said. Rules governing the assessment of fees also hindered the development of hedge funds in Hong Kong, he said. Managers are allowed to charge a fee based on a fund's performance just once a year, while their overseas counterparts typically assess fees on a quarterly basis. Mr Leroy also said the rally in equities had made stocks more attractive compared with hedge funds, which use a variety of strategies such as short selling and derivatives trading. 'The current timing is just not right for promoting retail hedge funds,' he said. Barep, a wholly owned subsidiary of Societe Generale, sells its hedge funds mostly to Hong Kong private banking clients and institutional customers such as insurance companies and stockbrokers. Mr Leroy said the company had no plans to target retail investors. The hedge fund manager, who is based in France, also said retirement funds should be allowed to invest in the high-risk products, but a spokesman for the Mandatory Provident Fund Schemes Authority (MPFA) dismissed the idea. While hedge funds offer the chance to earn high returns in all types of markets, badly managed ones can leave investors with losses. 'Japan has already relaxed the rules to allow pension funds to invest in hedge funds,' Mr Leroy said. 'This will enhance the retirement fund's performance and diversify its risks.' An MPFA spokesman said there were no plans to follow Japan's lead.