HFSB Assumes Oversight For Open Protocol Risk Reporting

May, 2017

The Hedge Fund Standards Board (HFSB), the global standard-setting body for the alternative investment industry, has become Co-Chair of the Open Protocol Working Group. The Open Protocol template standardises the collection and representation of risk information of hedge funds and other types of investment funds, and currently is used by funds with over $1 trillion in assets under management.

Open Protocol, which is an open standard which all investors and managers are free to adopt, will be added to the HFSB Toolbox. The Toolbox complements the HFSB’s standard-setting activities by providing additional guidance on practical issues to managers, investors and fund directors. The materials available through the Toolbox serve as a guide only and are not formally part of the Standards and the HFSB’s “comply-or-explain” approach. Open Protocol will become the fourth item in the HFSB Toolbox, following the publication of the Cyber Security Memo, Administrator Transparency Reporting and the Standardised Board Agenda.

Open Protocol was developed in 2011 by a working group of leading investors, managers and other industry stakeholders to improve alternative investment fund transparency and to aid investors in aggregating their exposure across funds. The Open Protocol Working Group will continue maintaining and developing the template to ensure it remains up-to-date. The working group will be co-chaired by Albourne Partners and the HFSB. In addition to the HFSB joining the working group, Callan Associates, the investment consultant, has also joined.

Dame Amelia Fawcett, Chairman of the HFSB, said: “Better risk disclosure by investment funds has been a priority for both investors and regulators in recent years. Investors are looking continuously for better ways to aggregate risk information about their investments in order to improve overall portfolio risk management. Regulators also have started collecting data to assess potential systemic risk concerns. Open Protocol allows investors to harness data with aggregate risk exposures, while managers can streamline their own reporting to investors.”

Simon Ruddick, Founder of Albourne Partners and Trustee of the HFSB, whose firm initiated the Open Protocol project in 2011, said: “We are delighted that Open Protocol has found a home with the HFSB. The HFSB provides a strong platform to take the work forward and is well-positioned to share the Working Group’s expertise on risk aggregation with the regulatory community, as well as help their efforts in addressing potential broader systemic concerns.”

Bruce Cundick, Chief Investment Officer at Utah Retirement System (URS), a Trustee of the HFSB and an Open Protocol Working Group member, said: “URS uses Open Protocol data to aggregate risk.  This allows us to better understand and manage the risks we take in our overall portfolio on behalf of our plan holders.”

Henry Kenner, Founding Partner & CEO, Arrowgrass Capital Partners and a Trustee of the HFSB, said: “Open Protocol has formed part of Arrowgrass’ comprehensive suite of information offered to investors for a number of years, reinforcing our commitment to transparency. We believe that such a protocol provides a consistent, industry-wide approach to risk and exposure reporting, benefitting both managers and investors alike.”

The HFSB was formed in January 2008 as the standard-setting body for the alternative investment industry, bringing together managers and investors globally to help determine how the industry should operate. It is custodian of the Hedge Fund Standards, which create a framework of transparency, integrity and good governance for the industry, facilitate investor due diligence and complement public policy. The HFSB also provides practical guidance to investors and managers in areas such as fund governance, standardised transparency and risk reporting, and cyber security through its HFSB Toolbox. The HFSB is supported by more than 125 alternative investment managers with approximately $1 trillion in aggregate assets, and by more than 60 institutional investors investing over $800 billion in hedge funds. The Hedge Fund Standards and the full list of signatories and supporters are available at www.hfsb.org.