PWG committees release hedge fund best practices

US group publishes final best practice guidelines for hedge funds and asset managers

WASHINGTON DC - The two private-sector committees established by the President's Working Group on Financial Markets (PWG) have released their finalised sets of best practices for asset managers and hedge fund investors, in an effort to increase accountability for participants in this industry.

The PWG originally tasked the committees, selected in September 2007 and comprised of well-respected asset managers and investors, with collaborating on industry issues and developing best practices. The committees released their draft best practices in April 2008, and provided a public comment period.

The committees have amended the reports to further the fundamental goal of the best practices and to clarify parts of the report.

The final best practices for the asset managers call on hedge funds to adopt comprehensive best practices in all aspects of their business, including the critical areas of disclosure, valuation of assets, risk management, business operations, compliance and conflicts of interest.

"Given all the events of recent months, it is more important than ever for the hedge fund industry to stand behind a set of far-reaching best practices that will promote investor protection and reduce systemic risk," said Eric Mindich, chief executive officer of Eton Park Capital Management, who chairs the asset managers' committee.

The final best practices for investors include a Fiduciary's Guide, which provides recommendations to individuals charged with evaluating the appropriateness of hedge funds as a component of an investment portfolio, and an Investor's Guide, which provides recommendations to those charged with executing and administering a hedge fund programme if one is added to the investment portfolio.

Gary Bruebaker, chief investment officer of the Washington State Investment Board, said, "These final recommendations can provide an important tool to those doing the diligence necessary to assess and monitor investments in hedge funds."

The reports can be found here.