WASHINGTON, D.C., August 2, 2005 — Managed Funds Association (MFA) today published MFA�s 2005 Sound Practices for Hedge Fund Managers, the culmination of a six-month effort by MFA to update thepreviously issued 2003 Sound Practices. Over the past two years, the hedge fund industry has nearly doubled in size to become a $1 trillion industry with a wide range of new financial innovations,strategies, markets and products. MFA updated and re-published its Sound Practices at this time, expanding coverage on key topics such as internal trading controls, responsibilities to investors,valuation, and risk controls, to ensure that hedge fund managers continue to have useful guidance on issues critical to the evolution of the industry and the integrity of the marketplace.
MFA, headquartered in Washington, DC, is a trade association representing professionals who specialize in alternative investment strategies, including representatives from the majority of the world�s largest hedge funds.
MFA�s 2005 Sound Practices for Hedge Fund Managers contains recommendations that are intended to promote sound business practices for hedge fund managers and, in doing so, enhance investor protection while contributing to market soundness. The recommendations contained in the 2005 Sound Practices are divided among the seven topics listed below (increased from six topics in the 2003 version). Transactional Practices is a new section, broken out from regulatory controls.
� Management and Internal Trading Controls;
� Responsibilities to Investors;
� Valuation Policies and Procedures;
� Risk Monitoring;
� Regulatory Controls;
� Transactional Practices; and
� Business Continuity and Disaster Recovery.
MFA Chairman, Adam Cooper, said, �MFA�s 2005 Sound Practices tackles timely issues of importance to our members, our industry, and the regulatory community. I am proud of this latest achievement and confident that our work will benefit all interested parties.�
As MFA is actively assisting its members prepare for the SEC�s new rule requiring many hedge fund managers to register with the SEC, new additions to Sound Practices include two appendices that provide a checklist for developing compliance manuals and codes of ethics. The guidance, however, is intended to benefit all hedge fund managers, whether or not they are required to register with the SEC, and reflects MFA�s belief that the most effective form of industry oversight is self-evaluation combined with the development of strong business practices and solid internal controls.
Faithful to the ideals of earlier Sound Practices, published in 2000 and 2003, the MFA�s 2005 Sound Practices recognize that �one size does not fit all� among hedge fund managers or their funds. �We drafted our recommendations with enough specificity to provide meaningful guidance, but recognize it is impossible to provide guidance suited to all hedge fund managers,� said John G. Gaine, MFA President.
�Our latest Sound Practices offer a �peer to peer� perspective for hedge fund managers providing a framework for internal practices and controls. It establishes standards of excellence for single manager hedge fund operations,� added Stephanie Pries, MFA Vice President and Senior Legal Counsel, who coordinated the MFA effort. MFA�s 2005 Sound Practices expands the coverage of key topics for hedge fund managers such as internal trading controls, responsibilities to investors, valuation, and risk controls. �We cover new ground on issues of great importance such as hedge fund manager compliance manuals and codes of ethics, disclosure to investors, best execution and soft dollars,� she added.
Above all, MFA�s recommendations serve primarily to educate hedge fund managers, as well as hedge fund investors and those who monitor the industry. �MFA has developed a strong relationship with the SEC, CFTC and the broader domestic and international financial services policy makers and regulatory community as part of our outreach, and we will share our document with them. Notably, our document was recognized last week in a major report on financial stability released by the Counterparty Risk Management Policy Group II (CRMPG II), which indicates the valuable contribution of our Sound Practices to the industry and to those who provide oversight,� stated Mr. Gaine. He added, �MFA�s 2005 Sound Practices is the latest contribution to our rich legacy of achievements for the hedge fund industry.�
For a copy of MFA�s 2005 Sound Practices for Hedge Fund Managers, please visit MFA�s website at: www.mfainfo.org.
MFA, headquartered in Washington, DC, is the primary trade association representing professionals who specialize in alternative investment strategies including hedge funds, funds of funds and managed futures funds. MFA�s nearly 1,000 members include managers affiliated with the majority of the 50 largest hedge funds, which manage a significant portion of the estimated $1.1 trillion invested in hedge funds. Since its inception in 1991, MFA has provided industry leadership in government relations, communications, media relations, and education to MFA members and investors.
