AIMA Canada Publishes Guide to Sound Practices for Canadian Hedge Fund Managers-Guide Marks Major Mi |
Date: Wednesday, March 10, 2004
AIMA Canada, the Canadian chapter of the Alternative Investment Management Association, today introduced a Guide to Sound Practices for Canadian Hedge Fund Managers.
The Guide covers various practical aspects of establishing and managing a hedge fund business in Canada and suggests corresponding sound practices. Intended as a useful reference tool for a wide variety of Hedge Fund managers, it is the Canadian version of a similar Guide produced in 2002 by AIMA for European Hedge Fund managers.
The Guide will help new entrants to the Canadian hedge fund industry and existing managers to adopt sound business practices and benefit from the sound practices and experience of other well-established and successful Hedge Fund managers and industry participants.
"Publication of this new guide marks a major milestone for the over $10 billion Canadian hedge fund industry," said AIMA Canada Founding Chair Jim McGovern.
"With the rapid growth of the hedge fund industry in recent years, it's important for new entrants to establish their organizations as viable business entities. This guide is designed to help them manage the business risks involved at the start of the business and throughout its life. It is also intended as a reference guide for established hedge fund managers," he continued.
"We expect that this Guide will become a valuable information resource for other interested parties including Canadian institutional investors, regulatory authorities, educational institutions and journalists, thereby enhancing investor confidence and understanding of the alternative investment industry."
In introducing the new Guide, Mr. McGovern said: "Like any growing industry, we owe much to those who have the foresight and dedication to create valuable tools for the assistance of all participants. AIMA Canada would like to acknowledge with sincere appreciation the important contributions its parent organization - AIMA- and the organizations listed at the end of this release have made to the development of this Guide."
The content and format of each of the Guide's six chapters are designed to maximize the Guide's use as a practical, user-friendly tool, rather than a textbook. Key topics covered in the Guide include:
Chapter 1. Creating and managing a hedge fund business.
This section discusses management and controls, outsourcing, allocation
of tasks, systems and accounting, financial resources, compliance
function, compliance monitoring and relationships with regulators,
employee recruitment, employee management and employee training.
Chapter 2. Investment process and portfolio risk management.
This section discusses investment strategy, managing the investment
process, risk parameters, position monitoring and review, dealing
procedures, best execution, trade allocation, use of derivatives, code of
market behaviour, inducements and soft commissions, conflicts of
interest, personal account dealing, portfolio risk management, defined
process, frequency of reviews, independence of reviews, market risk
leverage, liquidity and counterparty exposures.
Chapter 3. Portfolio administration and operational controls.
This section discusses trade procedures, non-trading transactions, bank
account reconciliation, investor transactions, portfolio valuations and
pricing policy, valuation reconciliations, control of management,
performance, administration fees and other accruals, monitoring of
investment restrictions, managing service providers, prime brokers,
administrators, brokers, other support functions, professional advisors,
information systems and business continuity.
Chapter 4. Raising capital and investor relations.
This section discusses marketing, regulations on promotion and marketing,
targeting and attracting investors, anti-money laundering, special
agreements with investors, adequate disclosure, timely disclosure of
information and disclosure to all investors.
Chapter 5. Hedge fund structures and organization.
Earlier sections discuss sound practices in connection with hedge fund
management. This section discusses sound practices with respect to hedge
funds as careful analysis in the initial structuring can help avoid delay
and further expense restructuring the hedge fund at a later date. This
section therefore discusses the legal structure of the hedge fund and its
domicile, taxation, listing, multiple classes and ring fencing,
prospectus and material contracts, appropriate professional advice,
directors, hedge fund administrator, prime broker and custodian,
auditors, lawyers and hedge fund managers.
Chapter 6. Special Considerations for creating and managing a Hedge Fund
of Funds (FOF) business.
Many of the sound practices for Hedge Fund managers covered in the first
five sections are applicable to FOF managers. This section covers some of
the additional considerations that are unique to FOF managers. Topics
covered in the section include: investment process and portfolio risk
management, portfolio management and strategy allocation, benchmarking,
reporting and disclosure, leverage, transparency, conflicts of interest
and structured products.
With thanks to the Working Group and other contributors to the Guide...
Working Group
- Abria Financial Group - Maple Securities Canada Limited
- Arrow Hedge Partners Inc. - RBC Dominion Securities Inc.
- Hillsdale Investment - Torys LLP
Management Inc.
With the help of...
- Aird & Berlis LLP - Mercer Investment Consulting
- Blair Franklin Capital - Norshield Asset Management
Partners Inc. (Canada) Ltd.
- Blumont Capital Corporation - Polar Securities Inc.
- Deloitte & Touche Canada - Rosseau Asset Management Ltd.
- JCClark - Scivest Capital Management Inc.
- McMillan Binch LLP - The Bank of Nova Scotia
- York Hedge Fund Strategies Inc.
...and other members of the AIMA Canada community.
About The Alternative Investment Management Association (AIMA)-
AIMA is a not-for-profit, international trade association whose objectives are: to increase investor education, transparency and promote due diligence and related best practices, and to work closely with regulators and interested parties in order to better promote and control the use of alternative investments. Its membership includes fund of funds managers, institutional investors, hedge funds, prime brokers, exchanges, fund administrators, auditors, lawyers and other service providers. These member companies are based throughout Europe, North America, Asia, Australia and the Middle East.
AIMA Canada was formed in March 2003 to act as the voice of the alternative investment industry in Canada. AIMA Canada now has over 50 corporate members. For additional information on AIMA Canada contact Lynda Briant, General Manager, AIMA Canada at 416-453-0111 or briant(at)aima- canada.org. The Guide can be obtained from the following web sites:
Reproduction in whole or in part without permission is prohibited.
