Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Thursday, January 31, 2008

More transparency for hedge funds

It seems only recently that hedge funds were being demonised. Conferences hosted panel sessions where issuers queued to hear their strategies. Companies watched share registers anxiously to see activist hedge funds taking positions.

However as hedge funds increasingly become mainstream and a standard part of investment portfolios, initiatives are emerging that will change those perceptions.

In the US, Calpers and Harvard Management are among those working on a guide that will seek to shed light on an industry still seen by many as secretive and opaque.

The guide will look at the pros and cons of hedge fund investing, methods behind common hedge fund strategies, historic performance data and other considerations for potential investors. This guide is expected to be published by the London-based Alternative Investment Management Association around April.

Some of the AIMA committee members started investing with hedge funds over 10 years, at a time when institutional investment was rare. Recently institutional investors have become the main source of the industry's growth.

In another outreach initiative the Hedge Fund Working Group in London published last week a set of voluntary standards it wants U.K. hedge fund managers to comply with, after widespread calls from European politicians for greater regulation of funds' activities.

And in the U.S, two advisory groups set up last year by the President's Working Group on Financial Markets are preparing to come out with recommendations for the industry there.

And despite January’s appalling month for the markets, hedge funds – who are adept at working both sides of the market - will often attract more investment after market downturns, when their portfolios have historically outperformed falling stock and bond markets.

So with the crucial role played by hedge funds especially in turbulent markets, the transparency initiatives are to be welcomed.


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