Rydex was able to navigate the process relatively quickly. It registered and brought to market a public fund of funds in about six months. One differentiating factor for the fund, called the Rydex Capital Partners Sphinx Fund, might have been that it is indexed to the Standard & Poor's Hedge Fund Index, which is daily priced using hedge fund separate accounts.
Rydex' fund is one of the few live funds that can sell shares to investors who don't meet eligibility requirements but who are being advised by a qualified fiduciary, Mr. Ewing said. He said Rydex modeled its approach on a hedge fund of funds, the DB Hedge Strategies Fund, which is offered by a unit of Deutsche Bank. The DB fund was groundbreaking in the way it structured the fund to make it easier for investment advisers to sell shares to clients.
There also are issues to deal with in getting a fund distributed, particularly a retail type of vehicle being sold through investment advisers, such as brokers and financial planners. While there is a large untapped market in that segment, advisers generally are behind the curve in understanding hedge funds-both the benefits and the risks.
That's an area that some firms are putting a lot of resources into changing. Man Investments, London, which is selling a registered hedge fund in the United States, is putting a lot of emphasis on investor education and has succeeded elsewhere in the world in focusing on retail, most recently in Canada.
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