Business

Hedge fund adverts: US regulators lift ban

  • 11 July 2013
  • From the section Business
dollar bills
Image caption Hedge funds promise clever trading strategies and big returns.

An 80-year-old ban on advertising by hedge funds has been lifted by US regulators.

It means that hedge funds will be able to market their investment products to a much bigger audience through TV, radio and internet campaigns.

But hedge funds will still only be allowed to sell their products to wealthy clients.

Critics say the move is likely to benefit hedge funds in need of customers, rather than investors.

"You know who it is going to help? Those companies that can't get capital from anywhere else," said Heath Abshure, the president of the North American Securities Administrators Association - a group of state regulators - who opposed the new rule.

The term hedge fund covers a wide variety of investment firms. Some will have quite simple investment strategies and might invest in stocks and shares.

But it is common for hedge funds to use complicated financial products that would be hard for their customers to understand, which is why they are only allowed to sell to wealthy clients.

Investors must have an annual income of more than $200,000 (£134,000) or assets, excluding their main home, worth more than $1m if they want to become a hedge fund client.

It is not clear yet which companies will be first to take advantage of the rule change.

It is thought that big players may hold back and wait to see how the advertising market develops.