McVea, Harry --- "Alternative Investments and Retail Investors – A Bold but Risky Experiment" [2012] ELECD 240; in Athanassiou, Phoebus (ed), "Research Handbook on Hedge Funds, Private Equity and Alternative Investments" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on Hedge Funds, Private Equity and Alternative Investments

Editor(s): Athanassiou, Phoebus

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849802789

Section: Chapter 5

Section Title: Alternative Investments and Retail Investors – A Bold but Risky Experiment

Author(s): McVea, Harry

Number of pages: 29

Extract:

5. Alternative investments and retail
investors ­ a bold but risky experiment
Harry McVea*


1. INTRODUCTION

The label `alternative investments' is notoriously ill-defined, perhaps best
characterized in terms of an attitude to risk rather than as a distinct asset
class.1 Traditionally, access to alternative investments ­ and to investment
strategies typically associated with such investments ­ has largely been
restricted to sophisticated (or at least wealthy) investors. Such investors
are taken to know (or to be able to afford advice about) the risks they are
running and, therefore, to be capable of deciding where and how much of
their wealth they should invest. Furthermore, they are taken to be able to
bear the loss in the event that losses do, in fact, occur.
Yet while alternative investments have traditionally been the preserve
of sophisticated investors and market players, the last decade or so has
witnessed a growing desire by domestic and EU regulators to facilitate
retail investor access to a wider range of investments and sophisticated
investment strategies through the use of authorized onshore investment
vehicles. Claimed rationales for this policy are to promote greater con-
sumer choice and to offer retail investors the opportunity to diversify risk.
This chapter seeks to engage with, and contribute to, the ongoing policy
debate which surrounds the liberalization of the alternative investments
sector ­ in particular with regard to retail access to hedge funds and/or
hedge-fund-like strategies ­ as it applies to unsophisticated investors.
Furthermore, it seeks to describe and critique the regulatory ...