Mutual funds and UCITS with alternative and hedge strategies continue to grow and could reach $1 trillion by 2014, according to a new research paper by SEI and Strategic Insight entitled Regulated Alternative Funds: The New Conventional.

During the first eight months of 2011, more than $61 billion of net flows benefited regulated funds using alternative strategies worldwide. 

Within European UCITS, alternative strategies attracted $22 billion of net new flows in 2011 through August, following $50 billion in full-year 2010. Up until this summer’s volatility and impact on sales, gains were running at an even higher pace than last year. And 2011’s flows came despite a 90% drop in overall flows into long-term UCITS during the same period.

In an SEI press release, Jag Alexeyev (Senior Managing Director and Head of Global Research at Strategic Insight) suggested that hedge fund strategies and other alternative approaches offering enhanced management of volatility, uncorrelated returns and income, and better downside protection are gaining traction in the regulated space. 

Alternatives in Europe captured nearly 40 percent of all actively managed UCITS flows in the first half of 2011. But this progress needs to be considered in the context of the changing regulatory and fund distribution landscape.  Concern about the increasing complexity of UCITS funds using derivatives to implement alternative strategies is shaping the approach of regulators.

The paper can be requested at the link www.seic.com/NewConventional.  An executive summary also provides a few highlights.

~ Jag Alexeyev

Public Content, Subscriber Content The New Conventional, UCITS, hedge, alternative, SEI