The Managed Funds Association has drafted the fifth edition of its best practices for hedge funds, this year with special emphasis on restoring confidence, along with a due diligence questionnaire for investors.

This year’s version includes recommendations from the President’s Working Group. The first edition was issued in 2000.

“The hedge fund industry has a strong role in helping to restore financial stability and investor confidence, and to hasten economic recovery,” said Richard H. Baker, president and CEO of the Managed Funds Association. “The hedge fund industry recognizes its responsibilities as liquidity providers and risk dispersers in the markets, and continues to take the lead in its approach to disclosure and investor protection as well as risk management, valuation, and operational, governance and other matters.”

The 2009 edition calls upon hedge funds to disclose to investors such critical functions as valuation policies, risk management, trading and business operations, compliance, conflicts of interest, anti-money laundering and disaster recovery practices. It also asks hedge funds to exercise sound market discipline and to develop strong internal policies and practices.

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