The news of John Paulson launching a UCITS fund confused a few people in the investment industry. Why would such a successful hedge fund manager, in command of billions of assets, bother with UCITS?

It is true that the “monarch of hedge funds” is facing some challenges, and may restrict access to his flagship fund.

But irrespective of individual managers’ circumstances, the industry has a good idea why Paulson and other hedge fund managers are launching UCITS (discussed in detail in our Innovation study).

More important perhaps than why hedge fund managers are entering the regulated “onshore” space is the simple fact that they are – in growing numbers – and how this will change the competitive dynamics of asset management in time.

Uncertainty over AIFM is one driver behind the Newcits phenomenon, and some think that once clarity is achieved, UCITS alternative products will lose steam. On the other hand, current net flows progress suggest the party might continue.

And at the Fund Forum in Monaco last month, the co-founder of Marshall Wace argued that AIFM and other regulatory actions could prove potentially catastrophic, hurting the asset management industry while doing nothing about leverage in the banking sector.

Meanwhile, Paulson’s UCITS is expected to be launched on the Deutsche Bank Platinum platform. Interestingly, Paulson and Deutsche Bank have already crossed paths. The db x-trackers Hedge Fund Index ETF, launched in the prior year and exceeding $1 billion, runs on Deutsche’s hedge fund platform of forty managers that includes Paulson. Below is a clip from a presentation commenting how that fund epitomizes fund industry innovation.

Public Content, Subscriber Content AIFM, Paulson, ETF, Newcits, hedge funds