Best practices for hedge funds proposed

Reports by two advisory panels have proposed "best practices" for hedge fund managers to increase their accountability, reduce systemic risks and provide investors with more information. Treasury Secretary Henry Paulson Jr. released the reports today in Washington. Hedge fund managers prepared one set of recommendations; investors with money in the funds compiled the other set. Hedge fund managers called for expanded disclosure practices for all aspects of their business, including hard-to-value assets, risk management, business operations, compliance and conflicts of interest. Meanwhile, the investor group recommended creating a Fiduciary's Guide and an Investor's Guide for investors. The Fiduciary's Guide would provide recommendations to individuals charged with evaluating the appropriateness of hedge funds as a component of an investment portfolio. The Investor's Guide would provide recommendations to those charged with executing and administering a hedge fund program once a hedge fund had been added to the investment portfolio. "We must implement best practices and continually seek to strengthen our market and regulatory practices," Mr. Paulson said. The advisory groups, which were commissioned in September to make recommendations to the President's Working Group on Financial Markets, outlined steps for hedge funds to improve their operating practices in areas such as disclosure, valuation of assets, risk management and preventing conflicts of interest.