Reading the Hedge Fund Matrix website there are some key lessons and guidance to improve investor communication. Here is a extract from their website and our analysis.

The Hedge Fund Matrix is a joint initiative of AIMA, HFSB, IOSCO, MFA and the Asset Managers’ Committee of the US PWG. Its primary objective is to offer a first step towards harmonisation of existing hedge fund industry sound practices to all stakeholders – specifically hedge fund industry practitioners, institutional investors, policy makers and regulatory authorities.

The Hedge Fund Matrix is a user-friendly, online resource that brings together the sound practice guides of the host organisations. It provides the user with the means to compare the core principles throughout the various guides as well as to drill down to the guidance for each.

Provider Practice Guidance

AIMA in Guide to Sound Practices for European Hedge Fund Managers

1.  Hedge Fund managers should provide adequate disclosure of information to investors on a consistent and timely basis.

2.  Disclosure to investors should be made as soon as reasonably practicable, bearing in mind the need to protect all investors’ interests and any applicable legal or regulatory constraints. The Hedge Fund manager should be aware of these requirements and may wish to monitor compliance with them, though it has no legal obligation to do so.

3.  The maximum level of intended leverage should be disclosed to investors.

AIMA in Offshore Alternative Fund Directors' Guide

1.  A summary of shareholder correspondence should be provided quarterly by both the Investment Manager and the Administrator/Transfer Agent, highlighting key issues being raised so that the Board is aware of common themes such as concerns about performance or concerns about efficient administration.

2.  Directors are responsible for ensuring that shareholders receive, as a bare minimum, the information that is promised to them in the Fund’s prospectus. 

3.  The Directors should seek positive assurance from the Administrator that mailings to shareholders have occurred within statutory deadlines.

HFSB in Hedge Fund Standards: Final Report

1.  A hedge fund manager should do what it reasonably can to enable and encourage the fund governing body to include an appropriate level of disclosure (taking into account the identity and sophistication of potential investors) and explanation in the fund's offering documents of the fund’s investment policy/strategy and associated risks.

2.  A hedge fund manager should do what it reasonably can to enable and encourage the fund governing body to include in the fund's annual report a statement explaining how the fund has invested its assets during the relevant period in accordance with its published investment policy.

3.  A hedge fund manager should disclose and explain its investment and risk management approach in its own marketing materials and do what it reasonably can to enable and encourage the fund governing body also to include, to the appropriate extent, such disclosure and explanation in the fund’s offering documents. In addition to disclosure recommended in Standard 1 (Investment policy and risk disclosure), a summary of the risk framework (processes and risk management techniques employed) should be disclosed.

4.  To enable investors and creditors to be confident that operational risks are managed satisfactorily, a hedge fund manager should make available a summary of its procedures and controls applying to the management of operational risk to investors and creditors undertaking due diligence.

5.  A hedge fund manager should, to the extent it is able or permitted to do so, provide information on the fund’s committed funding or financing arrangements with prime brokers/lenders to investors in its due diligence documents or upon request.

MFA

1.  A Hedge Fund Manager should provide prospective and existing Hedge Fund investors with information regarding the Hedge Fund’s investment objectives and strategies, range of permissible investments, material risk factors and the material terms of an investment in the Hedge Fund. This information should be sufficient to enhance the ability of investors to understand and evaluate their investment in the Hedge Fund.

2.  A Hedge Fund Manager should work with its legal counsel to identify and adequately describe risks to be disclosed to Hedge Fund investors.

3.  A Hedge Fund Manager should develop and maintain a code of ethics and personal trading policies that include the appropriate use of material, non-public information. A Hedge Fund Manager should communicate the material aspects of this code and policies to Hedge Fund investors.

4.  A Hedge Fund Manager should periodically provide Hedge Fund investors with relevant performance data and, when appropriate, risk information regarding the strategy and terms of the Hedge Fund.

5.  A Hedge Fund Manager should deliver annual audited financial statements to Hedge Fund investors in a timely manner or as may otherwise be prescribed by laws or regulations.

6.  In relation to reporting to Hedge Fund investors, a Hedge Fund Manager should incorporate procedures that seek consistency between periodic reports and annual audited financial statements.

7.  A Hedge Fund Manager should disclose to Hedge Fund investors its relationships with prime brokers and other brokers that involve potential material conflicts of interest and, taking into account the nature of the Hedge Fund Manager’s business and type of investments or instruments traded, develop the appropriate policies and procedures.

PWG in Asset Managers' Committee Report

1.  A Manager should establish a disclosure framework designed to disclose material information to investors with sufficient frequency and detail, including with respect to financial and risk information and potential conflicts of interest, so that investors are able to:

1. make informed decisions regarding investments in the fund, and
2. appropriately monitor or manage the risks associated with exposure to the fund.

A robust disclosure framework is critical to the protection of investors’ interests. The framework should also include guidelines to address providing information to counterparties (commensurate with the relationship with the counterparties), subject to appropriate assurances of confidentiality.

2.  The Manager should provide investors with updated, material information on a regular and ongoing basis and communicate that information to investors as set forth in the Manager’s disclosure framework.