Canadian Organization To Promote Hedge Fund Education - 03/07/02

(March 7) The Hedge Fund Association (HFA), an international not-for-profit association of fund managers, service providers and investors, is opening a Canadian chapter. Its president is Sergio Simone, president of RJS Private Wealth Management, a Toronto-area planning firm that specializes in hedge funds.

Hedge funds are "the asset class of the 21st century," Simone said last night during a forum on hedge funds. The number of funds and assets under management has shot up dramatically over the past two years, from fewer than 20 hedge funds in 1999 to almost 100 now. There are more waiting for regulatory approval. Worldwide, assets have increased by $86 billion US, and now stand at around $500 billion.

But Simone fears that the education levels among both investors and advisors have not kept pace with the dramatic growth in hedge funds, hence the need for a Canadian chapter of the HFA.

"Anytime I've spoken about hedge funds, I've noticed a common denominator. The interest is incredible, the knowledge isn't," Simone said. As a result, investors and advisors may be attracted to fund returns without understanding the strategies and risks involved in earning those returns.

"Education can act as a firewall against the kind of people that would discredit the industry," he added. "I'm not saying that all of sudden there's going to be a bunch of crooks running around selling hedge funds, but even ethical advisors can get in the trap of selling a hedge fund that wasn't properly researched, which can later cause some serious regulatory issues."

Simone noted that there are no industry courses for advisors to qualify in alternative asset strategies and little in the way of training at the major brokerages. "In my opinion what we have here is a recipe for disaster," pointing to a recent newspaper article that misstated the minimum qualifications for investing in a hedge fund and left the impression that the bar to investing had been significantly lowered.

"We believe that greater the knowledge of both investors and advisors, the less the probability of creating scandal in our industry," Simone said. "Although the hedge fund industry has been around for more than 50 years in the United States, in Canada it's still in its infancy. It's less than seven years old. We're basically writing the rules as we go along. I believe that now is the time to help create rules, regulations and philosophies."

With the Canadian chapter of the HFA, Simone said, "I hope to bring the industry together on one platform with a common agenda: to growth the industry in an informed and ethical manner, to continue to educate investors and advisors about both the virtues and the perils of hedge fund investing, and to share that knowledge with others who can help advance the educational process."

In the past few months, the profile of hedge funds has increased markedly, with Web sites and newsletters devoted to explaining hedge funds springing up every few weeks. Last week, Canadian Hedge Watch, a Web site and bi-monthly newsletter published by Miklos Nagy, announced an agreement to provide educational materials and performance data to the Investment Funds Institute of Canada.

Filed by Scot Blythe,,