The MarketsJanuary 17, 2009

Hedge Fund Best Practices Study Panels Release Final Reports

Two private-sector study groups have released a finalized version of a series of industry best practices for asset managers and hedge fund investors designed to increase industry accountability for participants.

Reported by Fred Schneyer

According to a news release, the two study panels were established by the President’s Working Group on Financial Markets (PWG).

The asset managers document calls on hedge funds to adopt comprehensive best practices in all aspects of their business, including disclosure, valuation of assets, risk management, business operations, compliance, and conflicts of interest.

“Given all of the events of recent months, it is more important than ever for the hedge fund industry to stand behind a set of far-reaching best practices that will promote investor protection and reduce systemic risk,” said Eric Mindich, CEO of Eton Park Capital Management, who chairs the Asset Managers’ Committee, in the announcement.

Meanwhile, the best practices for investors includes a Fiduciary’s Guide providing recommendations to individuals charged with evaluating the appropriateness of hedge funds as a component of an investment portfolio, and an Investor’s Guide, which provides recommendations to those charged with executing and administering a hedge fund program.

“These final recommendations can provide an important tool to those who are doing the diligence necessary to assess and monitor investments in hedge funds,” said Gary Bruebaker, Chief Investment Officer of the Washington State Investment Board, in the news release

The committees’ work was based on a February 2007 PWG document, which sought to enhance investor protections and systemic risk safeguards. The PWG includes the heads of the U.S. Treasury Department, the Federal Reserve Board, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.

According to the news release, the Asset Managers’ Committee includes representatives from a group of hedge fund managers representing different investment strategies. The Investors’ Committee includes representatives from labor organizations, endowments, foundations, corporate and public pension funds, investment consultants and non-U.S. investors.

The two reports can be found at www.amaicmte.org.