The Association of the Luxembourg Fund Industry (ALFI) believes side-pocketing could be a solution to the current market freeze caused by Russia’s invasion of Ukraine, according to a report by Bloomberg.
The controversial practice, favoured by hedge funds but banned or severely restricted by many financial regulators, allows a firm to create a separate vehicle to hold assets that are too risky and illiquid to deal with in a normal way.
The report quotes ALFI’s deputy director Marc-Andre Bechet as saying that national regulators should reconsider their side-pocketing rules and remove any hurdles preventing fund managers from using them to protect portfolios from losses arising from Russian holdings.
