Hedge Fund Group Proposes Tighter Standards, Voluntary Watchdog

Jan 22 2008 | 1:03pm ET

A British hedge fund group has proposed sharper standards for the industry, including a watchdog to oversee compliance with the new voluntary guidelines.

The Hedge Fund Working Group, which includes representatives from 14 of the U.K.’s top hedge fund managers headed by former Bank of England Deputy Governor Andrew Large, issued its final report today, which includes tougher standards for asset valuation. It implores hedge funds to use third-party valuations where possible; at a minimum, it stresses that valuation and portfolio management should be handled by separate people.

It also codifies best practices on disclosure, governance, risk and shareholder conduct. In particular, hedge funds should offer more information about the amount of leverage used.

Hedge funds signing up to the voluntary code will either promise to comply, or explain why they cannot.

The report also proposes a Hedge Fund Standards Board, which will promote the best practices code, to be funded by the industry. Large estimated that the board would need £500,000 per year, financed by participating hedge funds, likely on a sliding scale based on size. Fauchier Partners founder Christopher Fawcett, who is also chairman of the Alternative Investment Management Association, was named a founding trustee of the new group. Other trustees are expected to be named from the hedge fund industry.

The HFSB would not have any regulatory function, nor would it be empowered to punish hedge funds that contravene the voluntary standards.

RELATED LINKS 

Final Report from the Hedge Fund Working Group


In Depth

Q&A: TCA Fund Management's Bob Press on Small-Cap Private Equity

Aug 25 2016 | 8:55pm ET

The emergence of private credit as a replacement for traditional bank financing...

Lifestyle

Kiawah: Island Reversal

Aug 24 2016 | 9:59pm ET

Looking for real estate investments but the typical real estate fare isn’t cutting...

Guest Contributor

Old Hill Partners: Embrace Illiquidity

Aug 9 2016 | 2:39pm ET

The age-old financial concept that higher yields are the result of higher risk and...