Hedge fund5/21/2023 ![]() Hedge fund managers should provide full transparency to investors over the use of any valuation models. Hedge fund assets and liabilities should be valued according to generally accepted valuation policies and procedures. This provides fund investors with assurance that the information on which they base their decisions is accurate and reliable. Periodic review of hedge fund disclosures by independent service providers verifies that the fund in question is adhering to accepted standards of presentation and performance calculation. Transparency enables investors to properly evaluate their holdings in the fund, and enables supervisors to monitor for the build-up of risks. Hedge fund investors and regulators require disclosures that detail key information on the funds managed. ![]() Funds of hedge fund managers should also put in place policies and procedures to manage the liquidity risk of the fund so that fund investors do not suffer undue difficulty when redeeming their units. Robust due diligence on the part of the investment manager in selecting which funds to invest is a key component in protecting investors' interests in these products. Hedge funds that are marketed to retail investors should provide a high degree of product transparency to protect investors’ interests.įunds of hedge funds provide a cost-effective means by which investors can gain exposure to the underlying performance of hedge funds. It is likely that many hedge funds are not suitable investments for small or retail investors, who typically lack the means to fully understand the nature and risks of investment in hedge funds. These types of investors are best placed to make their own determinations regarding the suitability of hedge funds. Investment in hedge funds is most suited to sophisticated and/or institutional investors who typically have sufficient means, expertise, and capacity to obtain a full appreciation of the risks. The industry saw about $70 billion in outflows in 2016. The global hedge fund industry ended 2016 with approximately $3 trillion in global assets under management, up from approximately $2.9 trillion in the prior year, according to data released by Hedge Fund Research Inc. The Asset Manager Code provides a set of globally applicable ethical and professional standards for firms managing assets, including hedge funds.
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