The Committee of European Securities Regulators has given approval for the inclusion of hedge fund indices in European Union-regulated funds for small investors.

These indices would give small investors indirect exposure to a global sector where assets have shot up to $1.5 trillion. In some EU states, small investors are barred from investing in hedge funds directly.

UCITS, regarded as the gold standard of open-ended mutual funds, represent €5.5 trillion of assets and are heavily regulated to protect investors.

The CESR said the indices would have to comply with several conditions in addition to what was already laid down in the UCITS rules on eligible assets. These, it said, should include the banning of any "backfilling", or retrospective changes to previously published index values.