ASIC sets new disclosure rules for hedge funds
Apart from providing simpler fee disclosure, hedge funds will also receive a new 'product definition' as part of new rules set by the Australian Securities and Investments Commission (ASIC).
The financial services regulator has introduced new disclosure requirements for hedge funds, which followed industry consultation and the Parliamentary Joint Committee report into the Trio Capital collapse.
As of 22 June 2013, all hedge funds will have to be defined as managed investment schemes which exhibit at least two of the following characteristics: complex investment strategy or structure, use of leverage, use of derivatives, use of short-selling and charging a performance fee.
ASIC will also require hedge funds to introduce a simpler fee disclosure which is "more in line with prevailing industry practice".
Where a hedge fund has invested 35 per cent or more of its assets in an underlying hedge fund or similar investment vehicles, the disclosure principles and benchmarks should be taken to apply to each significant underlying fund, ASIC stated.
ASIC Commissioner Greg Tanzer hopes the new rules will provide retail investors with the information they need about investing in such products.
"Given the risks for retail investors associated with investing in hedge funds, disclosure needs to provide retail investors with all the information they require to make an informed investment decision," he said.
"In some cases, this may include a decision not to invest in these products," Tanzer added.
The new rules will also see the removal of an independent custody benchmark.
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