On Thursday I was in Luxembourg at the ALFI european alternative investment funds conference to present on the future of Ucits hedge funds and Newcits. These products are on track to capture over Euro 30 billion of net flows in 2010, accounting for 15% of total Ucits net gains, as highlighted by ALFI's press release.

A greater number of hedge fund managers are making progress with Ucits now, and others are deciding to join the club (most recently Barton Biggs, author of the hugely entertaining book Hedgehogging). New alternative Ucits introduced in 2010 have raised Euro 6 billion – more money than new offshore hedge funds.

Our study for ALFI (PDF) details the multiple reasons supporting growth in the coming years. A well-defined regulatory framework, expanding needs for absolute returns and uncorrelated investments, and AIFMD are just a few of the drivers. The report combines analysis of Strategic Insight data with perspectives shared by industry executives through interviews conducted with the help of Sophie van Straelen of Asterias.

Big numbers attract attention. So our suggestion that alternative Ucits could see Euro 600 billion of cash flows in the coming decade was quickly noted by the media. Yet in the context of the regulated funds industry the numbers are not surprising. If alternatives’ share of Ucits inflows rises from 15% to 25% by 2020, and industry flows expand by a reasonable 5% per annum, then this cumulative amount is quite within reach.

~ Jag Alexeyev

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