CESR consultation on classification of hedge fund
05 February 2007
CESR launches a consultation the possibility for hedge fund indices to be classified as financial indices for the purpose of UCITS. The consultation paper elaborates on questions concerning the ability of hedge fund indices to fall within the definition of 'financial indices' contained in the UCITS Directive. It describes CESR's conclusions on hedge fund indices and proposes draft measures which will be adopted by CESR at 'level 3'.
At this stage, CESR’s stance on the eligibility of hedge fund indices comprises some of the following ideas:
On the issue of hedge fund indices diversification, CESR considers there is no need for additional level 3 guidelines.
It is proposed that an hedge fund index will not meet the criterion of 'representing an adequate benchmark' if the UCITS does not verify that the index provider clearly defines and makes publicly available an explanation of what the index is trying to represent, and assesses whether the methodology of the index construction will affect the extent to which it is representative for the market to which it refers.
It is proposed that the criterion of 'publication in an appropriate manner' will not be met unless the UCITS confirms that the index provider makes publicly available the full methodology of the index and the UCITS verifies that the index will be subject to an independent audit at least annually.
CESR considers that index methodology and standards will probably develop over time. In this respect, CESR proposes to monitor the evolution of the market to consider which measures might be necessary to cope with market developments.
CESR will publish a feedback statement and final level 3 text in the second quarter of 2007. A public hearing will take place on 2 April 2007.
Deadline for consultation is 16 April 2007.
Press release
Document
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