Hedge Fund Investor Group AOI Publishes Best Practice Principles

Hedge Fund Investor Group AOI Publishes Best Practice Principles

Alignment of Interest Association (“AOI”) recently published guidelines to serve as a platform for discussion among hedge fund industry participants. Formed in 2008, AOI is an informal group of like-minded institutional investors who want fairer terms from hedge fund managers. Membership to the group is restricted to hedge fund investors.

The principles cover three main areas:

Economic & Liquidity Terms:

Under Economic & Liquidity Terms, guidance is offered regarding function and transparency of management fees, performance fees and preferential terms. The document also offers suggestions for management of liquidity and illiquid investments.

Documentation and Governance:

The AOI document stresses clarity and consistency of documentation, as well as regular document review. Issues regarding Governance centered on policies and procedures (including education and training of personnel), as well as roles and responsibilities of directors, managers, general Partners and administrators.

Transparency, Variation & Disclosures:

High levels of transparency are encouraged “facilitate decision making by investors and more meaningful discussions regarding investment opportunities, management of the portfolio and risk management.

Managers must have a clearly defined valuation policy, committee and process, which should be communicated to investors.

The document also lists disclosures that should be made to investors, including inquiries by regulatory bodies, legal actions that could affect key personnel of the fund, changes of personnel and breaches of governance documents.

To view the AOI Principles, click here.

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