Hedge funds chart best practices norms

Hedge fund managers should give investors and banks more information about the risks they take and the way they value their assets, according to proposals published by a group of 14 fund managers in London.

Hedge funds including GLG Partners, Man Group and CQS UK enlisted Andrew Large, a former deputy governor of the Bank of England, to chair a committee to assess best practices for the $1.6 trillion industry.

The committee, which included Man deputy chairman Stanley Fink and Manny Roman, co-chief executive of GLG, on Thursday published its initial plans.

The new measures, which apply to hedge fund managers in the UK, will be voluntary. The push for self-regulation comes after Germany failed earlier this year to get the Group of Eight leading economies to tighten hedge fund regulations.

"There will be a levelling up to the highest standards that the best fund managers already apply,'' Large said. "The proof of the pudding will be in the eating. Clearly, it will be a voluntary process. There won't be someone standing there to bash you on the head if you don't comply.''

Hedge funds can use a wider range of trading strategies than mutual funds, raising regulatory and political concerns about their potential to destabilize markets.

The proposed rules would ask hedge fund managers to stress-test their holdings and provide information on risk controls to investors and lenders.

Fund managers should also alert companies in which they have an economic interest and avoid voting with borrowed shares, the group said.

Of the 14 hedge funds that took part in the committee proceedings, 12 are based in the UK.

Hedge fund managers in the UK are regulated by the Financial Services Authority. Responses to the proposals are due by December 14.