Foreign institutional investors suggested that as Taiwan's monetary market becomes more internationalized and liberalized, the long-term trend will see authorities allowing hedge funds.
An executive of a foreign investment and trust company said yesterday that since the government announced last month that as a deregulation approach of the capital market, the qualified foreign institutional investors (QFII) system will be suspended by the end of this year, foreign institutional investors are very concerned about the possibilities of offering hedge funds in Taiwan.
A hedge fund is a fund that can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in opportunities in any market where it foresees impressive gains at reduced risk.
Hedge funds are not approved by authorities in many parts of the world, including Taiwan, especially after the Asian crisis when hedge funds were mostly associated with negativity.
An executive of an European investment and trust company said that currently, daily buying and selling in the Taiwan stock exchange by foreign institutional investors amounted to tens of billions of NT dollars on the average, while at least 10 percent of the money was managed by hedge funds with detour methods.
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