Alternative Investment Management Association
30 January 2006
London, 30 January 2006: The Alternative Investment Management Association (‘AIMA’) - the leading global hedge fund and alternative investment industry association – has welcomed the Financial Services Authority’s (‘FSA’) comments on the hedge fund industry from its annual Financial Risk Outlook (‘FRO’) paper published last week.
In its paper, the FSA recognizes the growing importance and benefits of hedge funds to financial markets. The paper also observes that the overall risk of serious market disruption and confidence erosion from hedge funds remains low.
Nonetheless, AIMA accepts that the FRO paper raises a number of significant hedge fund industry issues, such as valuation practices and asset pricing. Here, the FSA is looking to encourage the continued industry development of guidance and standards, and cites AIMA as a leading example of the excellent work being done by trade bodies in this arena.
The hedge fund industry has looked at the areas of valuation practices and asset pricing in great detail. Indeed, in April 2005, AIMA published its initial “Asset Pricing and Fund Valuation Practices in the Hedge Fund Industry” Guide. The study’s findings also included 20 firm recommendations covering governance, transparency, procedures and pricing models.
AIMA is now planning to commence the second phase of its work in this area, working closely with key industry practitioners including managers and leading administrative and pricing bodies worldwide.
Similarly, AIMA acknowledges the FSA’s call for the industry’s use of third party administration and price providers. AIMA believes that this has already become an increasing part of normal industry practice. The importance of this issue has been noted via AIMA’s “Asset Pricing and Fund Valuation Practices in the Hedge Fund Industry” study.
The FSA paper also raises the issue of an independent Board of Directors and division of duties. This is a highly significant issue for the industry as evidenced by the publication of AIMA’s “Offshore Alternative Fund Directors Guide” in June 2005. The Guide looks at the fundamental practical, legal and tax considerations when selecting and appointing Directors of an offshore alternative fund, outlines the basic tasks which Fund Directors should carry out and suggests ways in which Fund Directors should manage their relationships with the Fund’s service providers.
Florence Lombard, Executive Director of AIMA commented: “The global hedge fund industry is constantly seeking to review and improve its practices. This is clearly evidenced by the work being carried out by AIMA and its members in the areas of asset pricing and fund valuation.”
Ms Lombard continued: “AIMA’s stated objective is to have an open dialogue and work closely with the FSA, and, all other global Regulators. We welcome these most recent observations from the FSA and we are now very much looking forward to receiving the forthcoming Feedback Statement to DP05/4.”
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For further information, please contact Eoin Brophy, AIMA, email@example.com or tel +44 (0)20 7659 9919.
1. About AIMA
Founded in 1990, AIMA is a not-for-profit global trade association with corporate membership in 46 countries, including over 270 in the UK. AIMA focuses specifically on hedge funds, managed futures and managed currency funds. More than 930 corporate members (comprising 3000 individuals) enable the Association to create global tools for the benefit of its members, institutional investors and regulators. Its objectives are to increase investor education, transparency and promote due diligence and related sound practices, and to work closely with regulators and interested parties in order to promote the responsible use of alternative investments. AIMA’s membership includes fund of funds managers, institutional investors, hedge fund managers, prime brokers, exchanges, fund administrators, auditors, lawyers and other specialist service providers. Please visit us at www.AIMA.org.