Administration August 3, 2002

US Hedge Funds Discuss Disclosure with Europeans

March 8, 2002 (PLANSPONSOR.com) - US hedge-fund managers, wrestling with the issue of how much portfolio information they should be required to disclose, are going overseas for input.

Reported by

Fred Schneyer

The International Association of Financial Engineers (IAFE) recently added representatives from two big Dutch pension funds and a UK hedge-fund advisor to the steering group of its Investor Risk Committee (IRC), according to a Dow Jones report.

The new IRC members include:

Thijs Coenen, head of risk management at ABP Investments, Europe’s largest pension fund. ABP recently announced it would allocate 4% of its portfolio to hedge fund investments.
Leo Lueb, manager of alternative investment strategies at PGGM, the second largest Dutch pension fund, which has also backed hedge-fund ventures.
Derek Doupe, director of alternative investments in the London office of Frank Russell Capital. Frank Russell Capital is stepping up its Europe and Asia hedge fund deals.

Evaluation Criteria

The appointments follow a series of IRC meetings with a number of executives in the UK and continental Europe where many investors are concerned about not having widely accepted criteria with which they can evaluate a hedge fund investment.

IAFE has also enlisted the help of the London-based Alternative Investment Management Association.

Meanwhile, forced by a US bear market to turn in increasing numbers to hedge fund investments to generate sufficient returns, pension funds and endowment officials are meeting with hedge fund managers to discuss the disclosure issue. Traditionally, US hedge fund investors haven’t demanded detailed disclosure requirements.

European investors are most interested in more market-level disclosure than solely for individual funds, Giovanni Beliossi, European coordinator for the IRC, told Dow Jones.

Disclosure Detail Depends on Fund Size

IRC has determined that reporting summary information about risk, return and positions can be enough and that the appropriate level of detail, frequency and delay varies by type of investment strategy and by the size of the fund.

IAFE is currently considering detailed recommendations for individual strategies. Since not all hedge funds fit neatly into categories, the committee is also looking at an alternative approach.