LONDON, May 13 Reuters Retail investors are pulling out of Europe39;s hedge fund industry, with assets under management shrinking to an eightyear low according to data released on Monday, as higher interest rates and lagging performance send smaller investors elsewhere.

Assets in alternative 39;UCITS39; funds in Europe shrank 3 to 236.3 billion at the end of March from three months earlier, according to research provider Kepler Absolute Hedge, which has data going back to 2016. The drop was faster than the 0.4 decline seen in the previous two quarters, Kepler said.

UCITS, or undertakings for collective investment in transferable securities, are a type of fund sold in the European Union which are heavily regulated to make them safer and more accessible to the public.

While UCITS have proved popular overall accounting for 12 trillion euros 12.9 trillion of assets at end2022, according to industry data they have fallen out of favour with investors chasing higher returns.

Hedge fund UCITS are rightly getting a lot of flak from investors lately. In fact, they increasingly strike me as an ice cube sitting in the sun, said Harald Berlinicke, partner at Sarnia Asset Management.

As many investors have found out the hard way, handcuffing hedge fund managers by imposing tighter restrictions…may have defeated the purpose.

UCITS funds place restrictions on the leverage and risktaking that enable other funds bought by institutional investors to juice up their returns.

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