How will the revised Fund Managers Code of Conduct affect my fund’s PPM?

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A manager should disclose to investors:

• the expected maximum level of leverage employed by the fund, and
• the basis of calculation of leverage which should be reasonable and prudent.

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A manager should provide the following information on securities lending, repo and reverse repo transactions to investors from time to time (and at least on an annual basis):

• Global data:
  • the amount of securities on loan as a proportion of total lendable assets and of the Fund’s AUM, and
  • the absolute amount of assets engaged in securities lending, absolute amounts of the repo book and the reverse repo book.
• Concentration data:
  • top 10 collateral securities received by issuer
  • top 10 counterparties of securities lending and repo transactions, and
  • top 10 counterparties of reverse repo transactions.
• Aggregate securities lending, repo and reverse repo transaction data:
  • by type of collateral received
  • by currency
  • by maturity tenor
  • by geography (counterparty)
  • cash versus non-cash collateral
  • maturity of collateral, and
  • settlement and clearing (tri-party, central counterparty, bilateral).
• Re-use and re-hypothecation data:
  • share of collateral received that is re-used or re-hypothecated, compared to the maximum authorised amount if any, and
  • information on any restrictions on type of collateral received.
• Return data, including the split between the return from securities lending, repos and reverse repos and the return from cash collateral reinvestment.
• Number of custodians and the amount of collateral assets received / held by each of the custodians.
• The proportion of collateral posted by funds which are held in segregated accounts, pooled accounts, or in any other accounts.

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(if applicable to strategy)

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X

A manager should disclose in the Fund’s PPM (or otherwise make such information freely available to investors):

• the liquidity risks involved in an investment in the Fund
• the liquidity management policies, and
• any liquidity tools or measures that could affect redemption rights.

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X

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A manager should ensure proper disclosure to investors in respect of:

• the custody arrangement of the Fund’s assets
• any material risks associated with such arrangement, and
• any significant changes to the custody arrangements or the associated risks.

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It is usually the case that PE funds would self custody assets. However, a PE fund manager may be subject to a licensing condition that it not hold client assets, in which case, custody arrangements will have to be put in place and these will then need to be disclosed.

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This is usually not applicable to our clients as their licences are subject to the condition that they cannot hold client assets.

 (See above)

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PE fund PPMs should have a detailed valuation section. Frequency of dealing will be less applicable as most PE funds do not strike an NAV.

A manager should disclose to investors the following before the introduction of any side pocket to a Fund:

• the limit to total assets to be side-pocketed
• the overall fee structure and charging mechanism (in respect of, among others, any management and performance fees)
• that the redemption lock-up period for a side pocket would be different from that of the ordinary units/shares of the fund
• how the manager defines and categorises investment products which are to be put into the side pocket and the policies and rationale for transferring investments in and out of side pockets, and
• where side-pocketed assets are allowed to be transferred to another investment vehicle, the circumstances under which transfers are allowed and the pricing mechanism for such transfers.

The actual amount of fees charged in relation to side-pocketed assets must be disclosed to investors from time to time.

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