Offshore directors of hedge funds are becoming more active defenders of investors' rights as regulators pay more attention to the burgeoning sector, according to the authors of a new set of industry guidelines.
Olwyn Alexander, a partner and hedge fund auditor at PwC, the professional services firm, in Dublin, said hedge fund directors - re-garded by many as a rubber-stamp requirement to avoid taxation - were paying more attention to what went on in the funds. "The directors are very active and engaged and I definitely see a trend of it improving," she said.
The Alternative Investment Management Association yesterday unveiled a set of recommendations on valuation of hedge fund assets, which it hopes fund managers, directors and investors will use to upgrade procedures at the funds.
Valuation practices are one of the concerns of financial regulators, who produced their own draft global guide on how to value assets last week. Ms Alexander and Kieran Conroy, managing director of fund administrator Citco in Dublin, chaired the Aima panel that produced the recommendations.
"If the industry is seen to be implementing sound practices the regulators will take great comfort from that and won't see the need to fix something that wasn't broken," Mr Conroy said.
Valuation is important for hedge funds because of the potential for conflict of interest between investors and fund managers, who stand to be paid more if assets are valued higher, but are also involved in the process.
Valuation is getting more complex as hedge funds increasingly invest in hard-to-trade assets such as private equity and over-the- counter derivatives, where the manager may be the best person to provide a value.
Among Aima's 15 guidelines, it recommends that hedge fund governing bodies - typically directors of brass-plate companies in offshore jurisdictions such as the Cayman Islands - put in place detailed valuation policies, appoint independent valuers and tell investors about involvement of the manager in pricing.
