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Alfred Jones is widely thought of as the father of the hedge fund. As a staff writer on Fortune magazine he took that leap many journalists have dreamed of and moved from critic to practitioner. But rather than just invest the $100,000 (£56,000) he raised long, he decided the best way to safeguard his investments against any potential downturn was to short certain holdings.

That was back in 1948. Since then various strategies have swamped the American investment markets. Absolute returns, target returns and 130/30 funds have all been offered to both retail and institutional investors alongside a myriad range of other hedge fund strategies.

But why has it taken so long for the UK investment markets to follow suit? In Germany the retail markets have been awash with strategies designed to hedge assets against liabilities – very much in line with the approach taken by continental European pension fund – for years.

F&C Investments, for example, has run the HBB Stiftungsfonds for the last six years with a cash plus target. Indeed, as Jason Hollands, director, head of corporate affairs, explains, the firm was one of the first in the UK to offer shorting as a retail option. In the UK, the F&C High Income fund, which offers Libor plus 2 per cent, has a track record spanning more than a decade.

Yet F&C seems the exception rather than the rule. At present, the firm is considering launching a further absolute return fund to challenge the supremacy of BlackRock’s £1.4bn Absolute Alpha fund. While these strategies are now becoming more mainstream – complete with their own IMA sector – compared with their usage and proliferation in both the US and Europe, it has been a long time coming.

“Like any new approach it is a question of whether the market is ready to understand these products,” explains Mr Hollands. “However, the more recent flurry of new absolute and target return products has in large part been driven by the advent of Ucits III, which has widened the range of instruments available to deliver such products (as well as changing market sentiment, which has increased demand for strategies lowly correlated to equity and bond markets) and therefore made such launches easier to execute.”

Another key factor that has held back IFAs investing clients’ funds has simply been caution: with no track record advisers are loath to place their faith in what they see as an untested approach. Critical mass and a track record are both important, stresses Rupert Tate, a partner at Sarasin & Partners. He is responsible for the firm’s three-fund range of IIID funds. “We started from scratch,” he explains, “and were able to get off the ground by our private clients expressing an interest in these types of products.”

Two funds were launched in May 2006, Sarasin GlobalSar IIID and Sarasin EquiSar IIID followed by Sarasin Real Estate Equity IIID in February last year. The strategy has proved successful so far: “We now have over £1bn in the family,” he says.

For Ryan Rogowski, head of Harewood Solutions, part of the BNP Paribas Group, the funds’ track record is just one of the three main reasons why these types of funds are just starting to take off. Citing the advent of Ucits III as another main reason, he stresses the importance of having the systems in place to be able to actually run these products. “Many people tend to overlook the associated management of the administration and risk management of the business,” he says. “You have to have the ability to produce daily NAVs, have recognisable indices and adequate risk management. You need a substantial infrastructure in place.”

As such, he continues, bigger firms can be better placed to provide this type of infrastructure necessary to run onshore funds of this nature. Less restrictions and considerably reduced regulations mean that boutiques operating in this area are better suited to launching offshore products. “There’s no need to report so frequently,” explains Mr Rogowski.

A time lag between new instruments being developed and new regulations being implemented, and waves of product launches is only natural, adds F&C’s Mr Hollands. “This is because both product providers need to feel comfortable that they have the necessary decision, risk, dealing systems in place and also the right operational infrastructure to deliver such products.”

It also takes time for the intermediary to feel comfortable adopting a new strategy for their client, he continues. “The broader IFA market will probably want such funds to develop at least three-year track records before they begin allocating clients to such funds.”

Hugo Greenhalgh is editor of Investment Adviser