Exchange-listed investors should demand 4% more

Investors in exchange-listed hedge funds should expect higher returns than for unlisted funds to compensate them for the extra risks they are taking.

Simon Elliott, head of investment trust research at Winterflood Securities, says the danger of shares of listed hedge funds trading at discounts to NAV justifies investors demanding 4% to 5% higher returns per year than from their Ucits hedge fund investments. Elliott says: “Over the past few weeks, a number of investors have felt the risk of shares trading at a discount in a closed-ended fund is just not worth taking.” The current average discount on listed hedge funds is 15%. This is wider than the 8.3% average gap over the past year, according to Royal Bank of Scotland. Winterfl...