On 18 September 2012, the Australian Securities and Investments Commission (ASIC) announced the release of industry guidance on new disclosure benchmarks and principles for hedge funds. Hedge funds have a number of characteristics that distinguish them from other managed investment schemes. These include use of leverage, derivatives and short selling. Consequently, investors in hedge funds can be exposed to more complex risks. However, many funds which exhibit the characteristics of hedge funds may not provide sufficient transparency in their product offerings to make investors aware of the nature of these risks. The new guidelines are aimed at improving investor awareness of the risks associated with these products. The guidance defines a hedge fund and sets out the categories of information that the fund must disclose, including key risks, and benchmarking risk management practices. The extent to which hedge funds are an existing source of consumer concern is not clear. However, to the extent that the reforms enhance transparency regarding risks and investment strategies, they are expected to result in benefits for investors. Hedge funds are likely to incur both transitional and ongoing compliance costs. Some funds had concerns regarding the disclosure of information that they regarded as proprietary. Some hedge funds may therefore exit the market and only offer their products to wholesale investors. A Regulation Impact Statement was prepared by ASIC and assessed as adequate by the Office of Best Practice Regulation.
- Hedge funds: Improving disclosure RIS [
137 KB] - Hedge funds: Improving disclosure RIS [
402 KB]