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Guide to Sound Practices forHedge Fund Administrators
September 2009
Guide to Sound Practices for Hedge Fund Administrators
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Table of Contents
1.1 Liaising with Lawyers.............................................................................71.2 Prospectus Review................................................................................81.3 Negotiating Agreements..........................................................................91.4 SLAs...............................................................................................101.5 Fund structuring.................................................................................11
2. INTERACTION WITH INVESTORS.....................................................................13
3.1 Trade Capture...................................................................................153.2 Security Valuation...............................................................................163.3 Reconciliations..................................................................................173.4 Expense Calculation............................................................................173.5 NAV Calculation and Reporting...............................................................18
4.1 Custody Services................................................................................204.2 Middle Office Services..........................................................................204.3 Banking and FX Services........................................................................224.3.1 Investor Transactions.................................................................224.3.2 Cash Collateral.........................................................................224.3.3 Margin Calls.............................................................................234.3.4 Dealing Cash Flow Forecasting......................................................234.3.5 Cash Management/Treasury.........................................................234.3.6 Foreign Currency......................................................................234.4 Tax Services......................................................................................244.4.1 United States...........................................................................244.4.2 Germany................................................................................264.5 Financial Statements...........................................................................26
5.1 Relationship Management......................................................................285.2 Monitoring of the Restrictions placed on the Fund’s Activity............................285.3 Company Secretary.............................................................................285.4 Directors..........................................................................................305.5 Management Companies/General Partners.................................................30
Appendices
Appendix 1 Working Group...............................................................................31Appendix 2 Investor Services/Anti-Money Laundering...............................................32Appendix 3 Performance Fee Equalisation............................................................44Appendix 4 Funds of Hedge Funds......................................................................49Appendix 5 AIMA’s Guide to Sound Practices for Hedge Fund Valuation.........................50Appendix 6 Sample IFIA Pricing Policy Document....................................................53Appendix 7 IFRS and Irish/UK GAAP- Impact on Valuation..........................................64Appendix 8 About the Associations.....................................................................66
Guide to Sound Practices for Hedge Fund Administrators
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Foreword
The
Guide to Sound Practices for Hedge Fund Administrators
was originally published inSeptember 2004 as a joint venture between the Alternative Investment Management Association(AIMA) and the Irish Funds Industry Association (IFIA). The Guide has now been revised to reflectvarious industry developments in areas such as valuations, tax and anti-money laundering (“AML”hereafter).In particular, the new Guide includes key extracts from the AIMA Guide to Sound Practices forHedge Fund Valuation. The area of valuation has been one of the hottest topics in theinvestment funds industry and the recommendations outlined represent a significant step forwardin providing a roadmap to industry professionals, and comfort to investors, in recommendinggovernance, control and risk mitigation processes in this area.This Guide is not jurisdiction specific and is relevant to practitioners around the world. AIMA andIFIA would like to thank and congratulate the members and staff of both associations (listed inappendix 1), all of whom have volunteered their time and worked extremely hard to produce thisGuide.Andrew Baker Gary PalmerChief Executive Officer, AIMA Chief Executive, IFIA
DisclaimerThe Guide is not to be taken or treated as a substitute for specific advice, whether legal adviceor otherwise. It does not seek to provide advice on any of the issues herein. The viewsexpressed in this Guide do not necessarily represent the views of all of the participants of the Working Group.
September 2009© The Alternative Investment Management Association Limited and The Irish Funds Industry Association,2009 All rights reserved. No part of this publication may be reproduced in any material form (including photocopying orstoring it in any medium by electronic means and whether or not transiently or incidentally to some other use of thispublication) without written permission by both copyright holders except in accordance with the provisions of theCopyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency.Application for permission for other use of copyright materials including permission to reproduce extracts in otherpublished works shall be made to The Alternative Investment Management Association Limited and the Irish Funds IndustryAssociation. Full acknowledgement to authors, publishers and source must be given. Warning: the doing of anunauthorised act in relation to copyright work may result in both a civil claim for damages and criminal prosecution.
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