This report is based on the Final Report from June 2008 and completes the principles already provided in 2008. It focuses on the methods hedge fund managers employ to deal with liquidity risk and on the due diligence processes used.
In the Funds of Hedge Funds – Final Report dated June 2008, and for the purpose of completing the principles provided for the report entitled Regulatory and Investor Protection Issues Arising from the Participation by Retail Investors in (Funds-of) Hedge Funds, published in February 2003, the International Organization of Securities Commissions’ (IOSCO) Technical Committee Standing Committee on Investment Management (TCSC5) proposed developing guidelines in the particular areas where it has identified additional investor protection regulatory issues in the funds of hedge funds field.
The following elements of international regulatory standards have therefore been developed:
I. The methods hedge fund managers employ to deal with liquidity risk
II. The nature and conditions of due diligence processes used by hedge fund managers prior to and during investment
1 With regard to the elements to be constantly monitored and analyzed by hedge fund managers
2 With regard to the resources, procedures and organizational structures that hedge fund managers might be required to use to carry out proper and robust due diligence
3 With regard to the conditions for authorizing the outsourcing of due diligence
© IOSCO
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IOSCO report on Hedge Funds PD305.pdf
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