Tuesday, January 22, 2008

Hedge funds to set up industry watchdog

Hedge funds to set up industry watchdog
Managers will be asked to contribute to Hedge Funds Standards Board, which would set and promote standards
UK-based hedge fund managers are to be asked to pay a fee to finance a new body to set and promote good standards, it was proposed today.
The new organisation, the Hedge Fund Standards Board, is the centrepiece of proposals from the Hedge Fund Working Group, which was set up by the industry last year to address political and investor concerns about the booming industry.
Sir Andrew Large, chairman of the working group, said that the new body would be a custodian of new standards, but emphasised that it would not be a regulator and would have no powers to sanction rogue firms.
Sir Andrew estimated that the new board would cost £500,000 a year to run and would be financed by a levy on UK hedge fund managers taking part. There would probably be a sliding scale, according to size.
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Christopher Fawcett, of the fund of hedge funds group Fauchier Partners and chairman of the Alternative Investment Management Association, was named a founder trustee of HFSB.
Other trustees would be drawn mainly from the hedge fund industry, said Sir Andrew, who has the backing of 14 of London's largest hedge fund management groups, including Lansdowne Partners, Man Group, Marshall Wace and Sloane Robinson.
Under the comply-or-explain regime, fund managers would either state they complied with the new standards or explain why not.
Among the standards are that fund managers adopt an independent process for valuing portfolios.
Sir Andrew said the original standards had been clarified and sharpened up since the group's interim report last October.
Hedge funds have come under fire from some politicians, especially on the Continent, for their sometimes aggressive approach to listed companies, their opaque and secretive processes and the perceived threat they pose to financial stability.
In some cases, they have been found guilty of insider dealing.

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