Alternative Investment Management Association
22 October 2008
The Alternative Investment Management Association (AIMA) - the leading global representative association for the hedge fund industry - has issued updated guidance to its members on how to implement an Internal Capital Adequacy Assessment Process.
In the current climate, AIMA believes that it is more important than ever for firms to have in place robust risk-management processes and adequate capital to meet key risks.
Financial Services Authority (FSA) rules require investment firms (including hedge fund managers and fund of hedge fund managers, banks and building societies) to undertake an ongoing process known as the Internal Capital Adequacy Assessment Process (ICAAP). By using the ICAAP, firms demonstrate to the FSA that they have quantified risks, put in place effective controls and employed stress-testing techniques.
AIMA’s ICAAP Guidance Note – originally published in July 2007 - has been revised to address issues that have been identified now that firms and the FSA have gained more practical experience of the ICAAP; and to include examples of the processes that have been implemented by firms to date.
Andrew Baker, AIMA’s Deputy Chief Executive, said: “The hedge fund industry has embraced the capital adequacy debate proactively and the sophisticated risk management techniques undertaken by hedge funds make this framework possible.
Hedge fund managers employ progressive business management techniques and we are fortunate to be able to draw on the expertise of leading advisers from the industry to guide our membership on how to most effectively implement this process.”
The Guidance Note was produced by an AIMA-led ICAAP Working Group, consisting of industry experts from compliance advisory, auditing and law firms. Members of the group include: John Griffiths of MMS Regulatory Solutions; Stephen Burke of IMS Consulting Ltd; Uner Nabi of Deloitte and Touche LLP; Philip Niel of FIM Advisers LLP; Sarah Nowell of Ernst & Young LLP; Fiona Raistrick of BDO Stoy Hayward LLP; and Matthew Jones of the AIMA Regulatory and Tax Department.
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About AIMA’s ICAAP Guidance Note
AIMA’s revised Guidance Note is practical and easy to use. It is available to AIMA members on the AIMA website (www.aima.org) under Guidance Notes in the Regulatory & Tax section of the Knowledge Centre.
AIMA, the Alternative Investment Management Association, has over 1,280 corporate members worldwide, based in 47 countries. Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting services and fund administrators. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators, worldwide.
AIMA is a dynamic organisation that reflects its membership’s interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website at www.aima.org