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Hedge Fund Best Practice AMC Report - Final

Hedge Fund Best Practice AMC Report - Final

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Published by johndwilson
President's Working Group on Hedge Fund Best Practices - Final Report. Focuses on 5 areas a) Disclosure b) Valuation c) Risk Management d) Trading and Business Operations d) Compliance and Conflicts of Interest.
President's Working Group on Hedge Fund Best Practices - Final Report. Focuses on 5 areas a) Disclosure b) Valuation c) Risk Management d) Trading and Business Operations d) Compliance and Conflicts of Interest.

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Published by: johndwilson on Jan 20, 2009
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05/25/2012

 
 
BEST PRACTICES
FOR THE
HEDGE FUND INDUSTRY
~ ~ ~ ~ ~
REPORT
OF THE
ASSET MANAGERS’ COMMITTEE
TO THE
P
RESIDENT
S
W
ORKING
G
ROUP
 
ON
F
INANCIAL
M
ARKETS
 
 January 15, 2009
 
 
* * *
T
HE
A
SSET
M
ANAGERS
 
C
OMMITTEE
 
Eric Mindich, Chair (Eton Park Capital Management)Anne Casscells (Aetos Capital, LLC)Marc Lasry (Avenue Capital Group)William Von Mueffling (Cantillon Capital Management)Anne Dinning (D. E. Shaw & Co., L.P.)Jonathon S. Jacobson (Highfields Capital Management)James S. Chanos (Kynikos Associates LP)Daniel S. Och (Och-Ziff Capital Management)Daniel H. Stern (Reservoir Capital Group)Edward Mulé (Silver Point Capital, L.P.)
C
OUNSEL TO THE
A
SSET
M
ANAGERS
 
C
OMMITTEE
 
Sullivan & Cromwell LLPSchulte Roth & Zabel LLP* * *
 
Table of Contentsi
EXECUTIVE SUMMARY...............................................................................................i
 
BEST PRACTICES...........................................................................................................1
 
Disclosure and Investor Protection..................................................................................1
 
I.
Disclosure of Material Information to Investors...................................................1
II.
Ongoing Information Provided to Investors..........................................................5
III.
Side Letters and Parallel Managed Accounts......................................................10
A.
Side Letters....................................................................................................10
B.
Parallel Managed Accounts...........................................................................11
IV.
Participation of Investors....................................................................................11
V.
Disclosure to Counterparties...............................................................................12
Valuation...........................................................................................................................14
 
I.
The Valuation Committee...................................................................................14
II.
Implementation of Valuation Policies.................................................................17
III.
Valuation Policies and Procedures......................................................................17
A.
Baseline Elements of the Valuation Policy...................................................18
B.
Investment Positions with No Readily Ascertainable Market Value............20
C.
Side Pockets and Other Similar Arrangements.............................................20
Risk Management............................................................................................................22
 
I.
The Manager’s Approach to Risk Management.................................................22
A.
Identification and Design..............................................................................22
B.
Measurement, Monitoring and Management................................................23
C.
Personnel.......................................................................................................24
II.
Categories of Risk...............................................................................................25
A.
Liquidity Risk................................................................................................25
B.
Leverage Risk................................................................................................26
C.
Market Risk...................................................................................................27
D.
Counterparty Credit Risk..............................................................................30
E.
Operational Risk............................................................................................31
Trading and Business Operations..................................................................................33
 
I.
Counterparties.....................................................................................................33
A.
Selection of Counterparties...........................................................................33

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