In a statement from the Bank, Paul Smith, Head of Global Fund Services Worldwide, said: 'We are delighted at the depth of the reforms and fully support the SFC's moves. We believe that hedge funds represent a significant opportunity for Hong Kong to establish itself as a vibrant centre for new and emergent investment managers. This will benefit the financial services industry greatly.'

'Therefore', urged Mr Smith, 'some of the proposed criteria on the approval of qualifying managers for products need to be re-thought in the light of this goal.'

According to Dave Smith, head of worldwide Sales and Client Servicing for the Bank of Bermuda, the hedge fund industry has been greatly misunderstood in Hong Kong. 'It is not the managers' experience in the alternative sector, nor assets under management that should be the determining criteria for the approval by the SFC of a hedge fund product, but rather the depth of fund management talent, their overall investment management experience and the quality of their organisation, particularly their compliance arrangements,' said Mr Smith.

'Conservatively managed hedge funds are important to the retail investors and the Hong Kong industry needs to work together to introduce products they can invest in,' he added.

As a member of the Alternative Investment Management Association (AIMA) in Asia, Paul Smith stressed that the AIMA has been involved with the industry from inception and has been instrumental in setting industry standards. As such, he said, they have a wealth of information and experience into which Asia's fledgling hedge fund industry could tap.