Industry Group Calls For Redemption Policy Transparency

Aug 4 2009 | 12:55pm ET

How does a hedge fund handle redemptions? The question has grown in importance as the economic crisis brought on a deluge of withdrawal requests, with unhappy parties now often seeking the answer in the courts.

But fear not! A year after the subprime mortgage market collapse set off the hedge fund slide, one self-regulatory body is promising best-practices guidelines for how to deal with an avalanche of investors who want out.

The Hedge Fund Standards Board has put out a “consultation paper” on how to best handle redemption requests.

The group’s “best practice assessment” offers a trio of hypotheses: redemption restrictions are OK, but liquid hedge funds should not use them, and a new fee that should be charged to investors who revoke their redemption notices.

Lest one think that these “practices” are only in the best interests of hedge fund managers, the HFSB falls back on that great buzzword for hedge fund regulation: transparency. The proposal suggests that hedge fund managers clearly spell out possible redemption restrictions in their prospectuses, and what circumstances might trigger them. The HFSB even offers up a handy flowchart to better explain the system to investors.

Interested parties have until Sept. 18 to comment on the HFSB proposal.


In Depth

GSAM’s Papagiannis on Liquid Alternatives

May 25 2016 | 5:07pm ET

The popularity of liquid alternatives strategies has blossomed in recent years,...

Lifestyle

From Modern Trader: Stephen Curry is a Black Swan

May 18 2016 | 7:43pm ET

What do the rise of the Internet, the sinking of the Titanic, 9/11, and Stephen...

Guest Contributor

LendingClub and the Question of Internal Hedge Funds

May 19 2016 | 8:42pm ET

Peer-to-peer lending platform LendingClub Corp. has been in the news since the firm...