WEST PALM BEACH, (HEDGECO.NET) – CI Fund Management announced that it will begin to utilize stock short-selling strategies within its asset management portfolios this coming September. According to aletter sent by the CI management to investors, the firm said it has been granted the permission by the industry regulators to begin trading with such strategies.
Bill Holland, the president and chief executive for CI said, “Portfolio managers that do a lot of analysis feel that they run into stocks that are just as unattractive as the ones they buy are attractive. Being able to short a modest amount of it, they feel, will improve the returns,” he explained. According to CI statements, the firm has been granted authority by Canadian regulatory authorities to begin short selling in 14 of its mutual fund portfolios, and may short as much as 10% of the total of the fund�s assets.
About 50 Canadian hedge fund firms engage in short-selling strategies, but lately increasing numbers of Canadian mutual funds have been granted permission to use such techniques. Mutual fund managers have been turning to hedge fund techniques to increase poor returns from equity markets. According to Jacques Chartrand, portfolio manager of National Bank’s $175-million Canadian Opportunities Fund, “The big objective is to participate. If we think a stock goes up, we buy it and if we think a stock can go down, we short,� he said.
Some hedge fund market analysts think this idea may generally lead to conflicts of interest. According to Jonathan Bergman, who manages $200 million at Palisades Hudson Asset Management Inc., this situation could be problematic. Bergman said, “I am not excited about this and I will prefer that mutual fund companies not do it. It will be tough to reconcile the conflicts of interest.” Bergman explains that he invests in hedge fund managers, but his preference is that such hedge funds do not run mutual funds simultaneously.
These issues may eventually be decided by industry regulators, it remains unclear how such questions could be reconciled with different jurisdictions and nations which determines its laws and regulations. One possible outcome is that mutual funds and hedge funds will continue to seek offshore locations that offer them more flexibility and limited regulatory interference.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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