The Italian hedge funds market is experiencing exponential growth, with the number of speculative funds at 161 at the end of 2005 - a 23 per...

The Italian hedge funds market is experiencing exponential growth, with the number of speculative funds at 161 at the end of 2005 - a 23 per cent increase on the previous year, according to a study by the Alternative Investment Management Association and lawyers Simmons & Simmons. The aim of the survey was to identify the future needs of the industry. Among the key findings was an imbalance between hedge funds, which only have 3 per cent of the market against funds of hedge funds that have 97 per cent of the market. There is a need for the domestic hedge fund industry to become more focused on the international markets, and a need for specialist skills across the range of strategies; in particular the absence of specialist on-shore knowledge appears to have dampened down market competition, said the survey. Overall, the report found that the Italian hedge fund market, which makes up 5 per cent of the European total, is well regulated and stable. A risk averse local market and some legal difficulties act as a brake on the entrepreneurial nature of the business, and there is a need to change the general description of funds from "Fondi Speculativi" (speculative funds) to one which reflects the risk management nature of hedge funds. Emma Mugridge, director of AIMA said: "Italy has been one of the pioneers of the European hedge fund industry and it has created a structure that meets investor transparency and regulatory need. "This survey has identified some of the issues that it now needs to address before it can move on with its market development. None of the findings of the survey are impossible to address and we hope this survey will act as a stimulus for renewed dialogue and, ultimately, change and future development," she said. Overall, Italian hedge funds manage €17.3 billion (€22 billion) as at 31 January 2006, representing a growth of 41 per cent from 1999 to 2005. In Italy, hedge funds still make up a niche sector when compared to most traditional forms of collective portfolio management, and are a very small part of the global industry. There were approximately 8,600 recorded hedge funds with total assets of in excess of $1 trillion dollars in 2005.