Recent regulatory change has made the marketing of hedge funds in the European Economic Area (the “EEA”) more involved, particularly for managers based outside the EEA. This appears to have led some US investment advisors to reduce their marketing in the EEA.

However, given that European investors currently account for around 20 per cent of global hedge fund assets under management, this is likely a temporary reaction to the regulatory overhaul the industry has recently endured, on both sides of the Atlantic. Further, it is anticipated that European investors will increase their allocations to hedge funds in the next few years. Increased allocations from institutional investors will be key to this growth. Indeed, KPMG’s 2015 report on the hedge fund industry finds that a majority of managers expect that pension funds would be their primary source of capital by 2020. “The days of hedge funds simply being an investment tool for high net worth individuals are over” according to MFA President and CEO Richard H. Baker. “Institutional investors like pension plans, university endowments and charitable organizations now make up nearly 65 percent of the industry’s assets. These diverse partnerships help local economies and underscore the important role alternatives play at both the macro and micro levels.” Arguably Europe has lagged the US in terms of institutional investors allocating to absolute return strategies. As such, there is real potential for growth...