Finding appropriate ways of giving retail investors access to funds of hedge funds is a key concern for IOSCO
Following on from its consultation report on principles for the valuation of hedge fund portfolios, the International Organization of Securities Commissions (IOSCO) is pursuing its work on standard-setting for the hedge funds industry. It is launching today a three-month public consultation to solicit views and comments from all interested parties about regulatory issues arising from alternative investment funds or funds of hedge funds (FoHFs).
Once it has identified the risks and the topics to be addressed, IOSCO will begin drafting standards in 2008. This process will bring together the regulators in Standing Committee 5 (SC5), which deals with asset management and is chaired by AMF Managing Director Hubert Reynier, and representatives of the hedge fund industry.
According to estimates, assets under management in FoHFs already account for more than one-third of total hedge fund assets. Moreover, FoHFs have become the pre-eminent vehicle for bringing alternative investment management techniques to retail investors. Commenting on this issue, Hubert Reynier said: "Alternative multimanagement places a special responsibility on fund of funds managers to exercise due care with regard to underlying funds, both when selecting them and subsequently, when monitoring them. Drafting standards applicable to managers' duties will not only provide significant security for investors who invest in this type of fund; it will be a powerful source of market discipline that will encourage hedge funds to comply with international best practices, especially in the area of asset valuation".
The AMF is currently evaluating French regulations on alternative multimanagement, in accordance with IOSCO's approach
The AMF has already initiated an exercise to reassess France's regulatory framework for alternative multimanagement, in collaboration with stakeholders in the French financial markets. This exercise will draw on the findings of an industry working group composed of investors and market practitioners, chaired by Philippe Adhémar, an AMF Board member and chairman of the Consultative Commission on Individual and Collective Asset Management
Philippe Adhémar commented: "These international discussions and activities have created a favourable context that is encouraging the AMF and market participants to ensure that France's regulatory framework for alternative multimanagement is in line with international standards so that, among other things, the soundness of its fundamental principles is fully demonstrated when IOSCO turns its attention to comparing the consistency and robustness of various domestic approaches to this issue"
