Hedge Fund Directory

Since last year, there have been number of reports in the press on how the hedge fund industry has attracted a lot of attention from regulators. Hedge fund operators are learning that with greater exposure in press, there will come greater scrutiny from regulators. So it is no surprise that the industry decided to take matters in its own hand and set the course. A report in Wall Streat Journal (” European Hedge Funds Issue Disclosure Guides“) provides more information on this regard.

“A group of Europe’s largest hedge-fund managers issued voluntary best-practice standards that could prompt greater disclosure from the funds, ahead of a similar effort in the U.S.

The guidelines, announced yesterday and backed by industry leaders such as Marshall Wace LLP, GLG Partners LP and Man Group PLC, call for funds to disclose investment strategies and types of investments, including their use of derivatives. They also say funds should disclose more detail about — and follow best-practice guidelines concerning — operating practices such as their risk management and governance.

The standards include a provision for not borrowing stock solely to make use of its voting rights, for instance, and giving investors clear explanations of the total fees they collect. The report also clarifies some standards proposed in October regarding how hedge funds approach governance and valuation.”

This step seems sensible as it might allow the hedge funds to dictate the rules rather then take it lying down from regulators. Maybe the Hedge funds can get away with the disclosure system that they design instead of one imposed on them and it can be invaluable advantage in long run. But in reality, it seems that the regulators might have different ideas.

From the report, “Teresa La Thangue, a spokeswoman for the UK’s markets regulator, the Financial Services Authority (FSA), declined to comment on how the standards might affect future regulation. The U.S. initiative under the President’s Working Group on Financial Markets is expected to issue its proposals by the spring.”

The proposals from US and UK are expected soon and the hedge fund group that came with the directives will be hoping that the regulators take clue from their ideas.