Short selling ban hits hedge funds

A majority (55 per cent) of hedge fund managers believe the short selling ban will materially affect their ability to implement their investment strategy, according to a survey by the Alternative Investment Management Association of Australia (AIMA).

However, the AIMA survey of 27 managers, covering 28 hedge funds and representing $24.7 billion in assets under management, found only six are considering suspending or closing their fund’s application/redemption terms.

Another key survey finding was that individual comments from respondent managers were “extremely negative” in their assessment of the short selling ban, according to AIMA chairman Kim Ivey.

The most common complaint about the short selling ban was either it negatively affected the manager’s investment strategy or it negatively affected Australia’s reputation as a sophisticated financial centre, he said.

The survey suggests the “short selling ban has not only created industry problems but also damaged Australia’s reputation as a safe and sophisticated market for offshore investors”.

“While the regulator continues to ban short selling both widespread market liquidity and true price discovery is being undermined,” he said.