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

Bob Doll's Ten Market Predictions For 2016

Jan 7 2016 | 9:37pm ET

Well-known market strategist Robert Doll has published his annual list of ten predictions...

Lifestyle

Citadel's Ken Griffin Donates $40M To New York's Museum of Modern Art

Dec 22 2015 | 9:23pm ET

Citadel founder Ken Griffin has donated $40 million to New York’s Museum of Modern...

Guest Contributor

Hedge Fund Marketing - Making the Most of Your Salesperson

Jan 20 2016 | 8:11pm ET

In this contributed article, Bruce Frumerman of Frumerman & Nemeth takes a close...