Progress report
An assessment of hedge fund YTD performance in the face of renewed fears for a potential eurozone crash Read More
19/10/2011
Comment: Amelia Fawcett
Amelia Fawcett is chairman of the Hedge Fund Standards Board
The Hedge Fund Standards Board is embarking on a new chapter. The task ahead is to make our Standards more international and gain support for them from managers and investors in Asia and the US.
We recognise this is an ambitious task but we are doing it in response to demand from many of the big international investors in alternative assets.
When the Hedge Fund Standards Board was launched in 2008, it was conceived as a regional initiative, framed in the context of the UK financial regulatory regime, to bring standards of good practice to the European hedge fund industry. We have made good progress along that route. Fund managers accounting for about two-thirds of hedge fund assets under management in Europe are now signatories to the HFSB standards.
However, the HFSB has outgrown its origins. Launched originally by 14 of the top hedge fund managers in Europe, in three years it has been transformed into an increasingly international body where the voice of investors is now as important as that of managers. Represented on the HFSB – either as trustees or in our Investor Chapter – are many of the leading investors in hedge funds in the world, ranging from New Holland Capital, BT Pension Scheme Management and Caisse de dépôt et placement du Québec, to the Government of Singapore Investment Corporation and the Future Fund of Australia.
This combination of managers and investors is a unique strength of the HFSB because it brings together both the regulated agents – the managers – with one of the key stakeholders for whom financial regulation of funds is framed – the asset owners or principals. In other words, the users and providers of services – the hedge fund ‘ecosystem’ in effect – have come together to establish standards they believe are important for their market. But this ecosystem is no longer purely European, it has become increasingly international; one of the most important strengths of the HFSB is the international spread of the investor community represented.
This international investor community is the main impetus for this next phase in the HFSB’s development. Investors which require their European managers to be signatories to the HFSB Standards of good practice want these Standards to be rolled out internationally and made relevant to managers in other parts of the globe.
This is happening at a time when there is a growing understanding of the role Standards can play in complementing statutory regulation. In today’s interconnected financial world, policymakers and regulators need to take a global approach to regulation. However, different legal jurisdictions and cultures make this challenging, particularly given the difficulty of writing detailed prescriptive rules in an industry as complex as the financial world.
This is where standards can play a vital role in complementing statutory rules. The aim of the Standards is to influence the way people behave and conduct their business, not by telling firms what
they can or cannot do but by defining the desired outcomes and then leaving it to individual firms to decide how best to achieve those outcomes.
It also has a significant advantage over rules-based regulation because Standards can be amended quickly in the face of the continuous evolution in financial markets. A standard-setter such as the
HFSB is a living body tasked with keeping the standards relevant and up to date and can respond quickly to market developments. It is much easier to change Standards or introduce new ones than to
change statutory rules or regulations through legislation in numerous different jurisdictions.
The HFSB will continue its work with public policy-makers to provide a thoughtful and balanced perspective on the issues affecting such a critical component of the financial system, and to share its experience in working with investors and managers to develop and update the standards that govern our market.
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60 seconds with... Kenneth Turchin
CAN YOU DESCRIBE YOUR CURRENT ROLE?
I have worked in public accounting and hedge funds and in the past eight years have been selling middle- and back-office services to the alternate investment industry. My role is to build relationships with clients, teach them about SS&C’s products and services, and ensure seamless transactions every time the firm launches a new fund.
IF YOU WERE DOWN TO YOUR LAST £1,000, HOW WOULD YOU INVEST IT?
I would buy THREE shares in Apple and hope for a repeat 383% return in the next five years.
WHAT WOULD YOU DO IF YOU WERE IN PRESIDENT OBAMA’S SHOES?
That’s one pair of size 12 shoes I do not want to be in!
WHO WOULD PLAY YOU IF THEY MADE A MOVIE ABOUT YOUR FIRM?
Kevin Bacon. He is a versatile actor and the centre of the entertainment universe. I am in sales. Everyone in the industry would be linked to me in six steps or less. My client list would be ridiculous.
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