The London-based hedge fund industry body, the Alternative Investment Management Association, has issued updated guidance to its members on how to implement an internal capital adequacy as
The London-based hedge fund industry body, the Alternative Investment Management Association, has issued updated guidance to its members on how to implement an internal capital adequacy assessment process.
In the current climate, the association says, it is more important than ever for firms to have in place robust risk-management processes and adequate capital to meet key risks.
Financial Services Authority rules require UK investment firms including managers of hedge funds and funds of hedge fund, banks and building societies to undertake the ongoing Internal Capital Adequacy Assessment Process, use of which demonstrates to the FSA that firms have quantified risks, put in place effective controls and employed stress-testing techniques.
Aima’s ICAAP Guidance Note, originally published in July 2007, has been revised to address issues that have been identified now that firms and the FSA have gained more practical experience of the assessment process, and to include examples of the processes that have been implemented by firms to date. It is available to members on the association’s web site.
‘The hedge fund industry has embraced the capital adequacy debate proactively and the sophisticated risk management techniques undertaken by hedge funds make this framework possible,’ says Aima deputy chief executive Andrew Baker.
‘Hedge fund managers employ progressive business management techniques, and we are fortunate to be able to draw on the expertise of leading advisers from the industry to guide our membership on how to implement this process most effectively.’
The guidance note was produced by an Aima-led ICAAP working group consisting of industry experts from compliance advisory, auditing and law firms, including John Griffiths of MMS Regulatory Solutions, Stephen Burke of IMS Consulting, Uner Nabi of Deloitte & Touche, Philip Niel of FIM Advisers, Sarah Nowell of Ernst & Young, Fiona Raistrick of BDO Stoy Hayward and Matthew Jones of the Aima regulatory and tax department.
Aima has more than 1,280 corporate members in 47 countries including hedge fund managers, fund of hedge funds managers, prime brokers, providers of legal and accounting services and fund administrators.
