In recent years, driven in part by an increasing desire of retail investors for investment strategies that are not correlated with major market indices, there has been a convergence of hedge fund strategies and mutual funds. Many strategies and products previously available only to sophisticated investors are now being offered in the form of mutual funds. The substantial increase in the number and variety of available alternative funds, coupled with the increased attention to these funds by regulators, suggests renewed focus on key oversight issues surrounding alternative funds.
Some alternative fund strategies and products can be difficult to fit within the unique regulatory requirements that govern open-end funds. While traditional 1940 Act asset managers are familiar with these requirements, advisors with experience in private funds may not be. Further, even complexes with traditional funds may be challenged to adhere to regulatory requirements while investing in new asset classes or pursuing alternative investment strategies. In all cases, directors, CCOs, and fund advisors and sub-advisors will want to work together to develop policies and procedures consistent not only with the regulatory constraints applicable to registered funds, but also with a fund's disclosed investment strategies and objectives.