The repeal of a certain section of the US Internal Revenue Service’s code back in 1997 paved the way for hedge fund managers to inch into the mutual fund world, but the recent offerings are more likely a response to the state of the financial marketplace, say industry observers.

The section of the code – known as the short-short rule – required that mutual funds derive less than 30 per cent of their gross income from the sale of securities held for less than three months.