AIMA To Develop First Sound Practices Guide For Fund Of Hedge Fund Managers

by Robin Pilgrim, for LawAndTax-News.com, London

09 July 2008

The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has announced it is to publish the world’s first global guide to sound practices for fund of hedge funds managers.

The guide, which is due for publication in early 2009, is being developed by some of the world’s leading fund of funds practitioners. It will focus on areas including risk management, disclosure to investors, valuation, management of conflicts of interest and other operational issues.

According to AIMA, it will be a practical business tool for fund of hedge funds managers and will also seek to provide relevant and insightful information for the investor, regulatory and political communities, and the hedge fund industry’s service providers.

The guide will be produced and overseen by a steering group of leading fund of hedge funds managers, who between them manage USD150bn of assets worldwide. The group, which is chaired by Gilles du Fretay, President of HDF Finance includes Financial Risk Management (FRM); Man Investments; Fauchier Partners; Allianz Alternative Asset Management; Unigestion; Pacific Alternative Asset Management Company; Ivy Asset Management Corp. and Penjing Asset Management.

Andrew Baker, Deputy CEO of AIMA and a member of the steering group commented:

“There are currently no dedicated guidelines for fund of hedge funds managers yet the majority of new institutional investors tend to favour this investment route, rather than investing directly in hedge funds.

"With established sound practices in place for hedge fund managers and on various hedge fund-related topics, there is a desire to document managers’ activities and responsibilities. The guidelines will demonstrate both the amount of work achieved in this area to date as well as the industry’s continued focus on documenting and enhancing its practices.”

According to Hedge Fund Research, global hedge fund industry assets grew from an approximate USD1,426bn at the end of 2006 to an approximate USD1,875bn at the end of Q1 2008. During the same period, the number of funds of hedge funds has grown from 2,220 to over 2,600. This continued growth is derived from the industry’s diversification and performance characteristics.

Over the last 10 years AIMA has developed guidelines in a number of key areas, including on Managers; Valuation; Administration; Governance; Business Continuity; Due Diligence for Managers and Service Providers; Anti-Money Laundering; and Industry Certification (in conjunction with the Chartered Alternative Investment Analyst (CAIA)).

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