ASIC consults on hedge fund disclosure
The Australian Securities and Investments Commission (ASIC) has released for consultation new draft guidelines for hedge funds featuring improved disclosure benchmarks and principles.
The move was prompted by experiences of investors not understanding the risks when purchasing a hedge fund product due to inadequate disclosure, according to ASIC chairman Greg Medcraft.
"Improved disclosure of the risks associated with hedge funds is particularly important because hedge funds can pose more diverse and complex risks for investors than traditional funds due to their various investment strategies, complicated structures and use of leverage, short selling and derivatives," he said.
The new principles contained in 'Consultation Paper 174 Hedge funds: Improving disclosure - Further consultation (CP 174)', cover a range of disclosures relating to the responsible entity, the individuals making the investment decisions for the fund, service providers, fund strategies and fund assets, ASIC stated.
Where a hedge fund has invested 25 per cent or more of its assets in an underlying hedge fund or structured product, the disclosure principles and benchmarks should be taken to apply to each such underlying fund or structured product, according to the guidance.
ASIC also proposed hedge funds should address benchmarks in disclosures to retail investors, on an 'if not, why not' basis, relating to the valuation and custody of assets and periodic reporting, explaining how they will deal with the business factor or the issue underlying the benchmark if they do not meet it.
Hedge funds should also provide disclosure to retail investors around the fund's investment strategy, investment manager, fund structure, valuation, liquidity, leverage, withdrawals, and use of derivatives and structured products and short selling, ASIC stated.
In terms of regulatory and financial impact, ASIC said the draft guidelines should strike a balance between preventing the mis-selling of hedge funds to retail investors and not unduly interfering with the marketing and sale of financial products.
Recommended for you
Ahead of the 1 January 2026 education deadline for advisers, ASIC has issued its ‘final warning’ to the industry, reporting that more than 2,300 relevant providers could be on their way out.
As high-net-worth investors look to opportunities in alternatives, Praemium has revealed that advisers who can deliver on this demand tend to have deeper relationships with their clients as they are seeking more involvement in the investment process.
As adviser-client relationships stabilise, Investment Trends’ latest report said digital hybrid advice models are key to addressing the supply-demand gap in Australia.
A Koda Capital partner and executive team member, who joined the firm from almost a decade in advice roles at AMP, has departed the wealth manager.
