Managed Funds Association Details New AUM Reporting

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Calculating assets under management (AUM) is set to change for certain hedge funds, as a calculation used by the Securities and Exchange Commission, called Regulatory Assets Under Management (RAUM), is set to take place. The Managed Funds Association (MFA) published a PowerPoint presentation explaining the changes.

New SEC guidelines: “Regulatory Assets Under Management (RAUM)”

When reporting to regulators, managers must now report assets managed without deduction of any offsetting liabilities, the presentation noted. This number represents all of the assets managed by a single manager, including assets of separate accounts and separate private funds.  Many hedge fund managers, such as quantitatively driven strategies, were known to offer customized strategy variations that sometimes was not included in the strategy totals.

Rules on reporting

Fund managers must also report hedging techniques used to offset portfolio risk, long and short positions (on a gross basis), leverage, proprietary assets, assets managed without receiving compensation, or assets of foreign clients, all of which an adviser may currently exclude from its AUM, as well as the value of certain private funds that hold significant assets that are not securities and that can be illiquid and difficult to value, according to the MFA presentation.

Separate legal entities

The presentation noted that it is important to remember that hedge funds are legally separate entities, often with different investors and can engage in distinct trading activities in different assets and markets.  “Any losses of one fund are borne exclusively by investors in and counterparties to that fund,” the presentation noted, “and do not subject other funds managed by the same adviser to losses.

To view the entire presentation click here.

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