U.K. Hedge Fund Board Proposes Tougher Standards

Post-Madoff, the independent hedge fund best-practices group is recommending independent third-party fund administration, accounting and custody for hedge funds.

The Hedge Fund Standards Board has proposed changes to its standards on fund administration and redemptions in the light of the financial crisis. The proposed changes, which are subject to consultation with the industry, would include requiring hedge funds to appoint an independent third party to administer the fund, prepare accounting records and carry out NAV calculations as well as having an independent custodian. Proposed changes regarding redemptions would place more onerous disclosure requirements on managers regarding possible restrictions on withdrawals.

Antonio Borges, Chairman of the HFSB, said: "The HFSB standards would already make it very difficult for a Madoff-type scandal to occur but we believe it is right to raise the bar higher in the light of recent events. These new standards would help to safeguard investors' assets and also lead to improvements in the redemption regime for hedge funds."

Fifty-six hedge fund managers have committed themselves to the HFSB's best practice standards.