Reuters – The Financial Services Authority (FSA) has recommended measures to make the hedge fund industry more open and transparent at a time when regulators have been stepping up scrutiny of thesector.
The watchdog is urging fund managers to spell out policies on pricing the instruments used in their funds and disclose these policies to firms such as prime brokers, the FSA said in a letter to the International Organisation of Securities Commissions (IOSCO).
Fund managers should have procedures for the day-to-day operation of a pricing process and these should be updated if a manager adopts instruments that are markedly different from those in an existing fund, the FSA letter, which was published by the FSA on Wednesday, said.
IOSCO is working on standards on the valuation process in the hedge fund industry and is due to complete this work by April next year.
The FSA visited a number of managers at hedge funds between March and May this year, as well as administrators and other groups.
The global hedge fund industry is estimated to hold up to $1.7 trillion (870 billion pounds) in assets with the bulk of funds registered in offshore locations like the Cayman Islands.
