Investors welcome all the help they can get in conducting due diligence on potential hedge fund investments.
On Thursday, the Hedge Fund Standards Board proposed three changes to current standards to help investors assess conflicts of interest as part of their due diligence.
The HFSB noted that this was the fourth time it was consulting with interested parties on amending its standards since they were first published in 2008. The board is taking comments until June 12.
At present, the HFSB has 123 hedge fund signatories representing $700 billion in assets. Forty percent of these are based in North America, 42% in the U.K. and 13% in the rest of Europe.
Investor chapters comprise 60 sovereign wealth funds, endowments, pension funds, funds of funds, private banks and investment consultants that collectively represent $500 billion. Forty percent are located in North America, 31% in the U.K., 16% in Europe and 13% in Asia/Pacific.
Three Amendments
One proposed amendment would require disclosure of similar funds, accounts or vehicles, including partner/employee funds, upon request.
Current standards require disclosure of the existence of parallel funds (including aggregate assets under management) that employ the same strategy to allow investors to assess their investment in the context of the overall allocation to the strategy.
However, the paper says, these do not explicitly address situations in which funds/accounts are not identical but in which sufficient overlap exists to create a potential conflict of interest.
