Isabelle Tykoczinski, a consultant with Kinetic Partners, says
that regulators should allow some shorting on a case by case
basis especially for those managers with shorting
Isabelle Tykoczinski from Kinetic Partners
UCITS hedge fund managers use different methods to create
portfolios in a fund. Some platforms hold assets directly;
others use a swap to replicate the risk/return profile; and
with CTAs there is also a hybrid method employed.
Tykoczinski explains: "Total return swaps and derivatives are
being used a lot by UCITS-compliant funds that short. This is
because UCITS rules do not allow investment managers to short
stocks directly if they are using the wrapper. This, coupled
with an increasing number of funds in this sector and the
growing demand for ETFs, means that there is more demand for
total return swaps.
"By using a total return swap, the investment manager should
know that they are creating...