The hedge fund working group chaired by former Bank of England deputy governor Sir Andrew Large has proposed public disclosure and voluntary restrictions on the use of voting shares.
The report argues for increased disclosure as a means to ensure that hedge funds address their responsibilities which have grown as their influence has expanded.
The report also recommends that managers include on their websites, “a summary of the manager’s investment strategies, details of assets under management, an indication of the number of funds managed, its regulatory status and its history.”
“Managers would need to ensure that whatever they publish on their websites does not constitute advertising material according to the Financial Standards Authority. But there are techniques for doing this. If you are determined to find a solution, you can,” says Sir Andrew.
In addition, the report suggests that hedge fund managers voluntarily agree not to exercise their right to vote using stock that they have borrowed.
“The hedge fund managers in the working group are making a statement, that companies are entitled to know who owns and votes on their shares. This is where these hedge fund managers are coming from and they thought it was worth saying so,” says Sir Andrew.
The report also tackles managers’ processes for ensuring accurate valuations, effective risk management and other areas of disclosure and governance. Its authors said they have tried to show how they will comply with the principles laid down by the Financial Services Authority (FSA).
The Alternative Investment Management Association believes that the initiative represents a substantial undertaking by a number of the UK’s largest hedge fund managers, most of whom are also AIMA members.
AIMA says the group’s emphasis on developing key areas such as risk management and disclosure is also seen by AIMA as extremely timely and of particular importance.
“AIMA looks forward to responding to this document and working with the UK Hedge Fund Working Group on the areas outlined,” says Andrew Baker, deputy CEO at AIMA.