PRINT THIS PAGE The hedge fund best practice standards: The investor perspective09/07/2008. Source: KPMG.
The hedge fund investor community is strongly in favour of industry standards proposed by the Hedge Fund Working Group, according to a survey by KPMG of UK institutional investors, funds of hedge funds and investment consultants. When making investment allocations, eight out of ten pension funds said they would favour a hedge fund manager who had complied with the hedge fund best practice standards. In 2007, fourteen of the UK’s largest hedge fund managers formed the Hedge Fund Working Group (HFWG), with the aim of establishing a benchmark of best practice in the industry and to promote self-regulation.
In January 2008, following an extensive consultation process, the HFWG published a report outlining 28 principles-based standards for best practice, and in February the Hedge Funds Standards Board (HFSB) was established as custodian of the standards.
The standards covered five key areas — disclosure, risk management, valuation, shareholder conduct and fund governance. The fourteen original signatories have committed to ‘comply or explain’ by 31 December 2008, and envisage that others in the industry will follow.
In response to this, and to encourage debate, KPMG commissioned an independent survey to explore the attitudes of the UK investor community towards the standards.
The survey included UK institutional investors, fund of hedge funds, and investment consultants. Their responses form the basis of this white paper.
The creation of the HFWG was a sensible initiative by the hedge fund industry to promote good practice amongst its members, and to put in place a framework for self-regulation. The HF Standards aim to pre-empt more stringent regulation, which might otherwise be imposed on the industry.
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