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Hedge fund investor group releases latest best practices principles

Alignment of Interests Association, Austin, Texas, on Tuesday released the latest version of its hedge fund best practices manifesto, including guidelines designed to better align the interests of asset owners and hedge fund managers.

The AOI Hedge Fund Investing Principles focus on three core areas: economic and liquidity terms, documentation, and governance.

Prominent among the principles are management fees and expenses, performance fees, hedge fund managers' investment in their own strategies, fair liquidity and side pockets, portfolio transparency, and valuation, the document shows.

The investment principles were written in collaboration by a 15-member steering committee, including the Austin-based $129 billion Texas Teacher Retirement System, $37.4 billion University of Texas Investment Management Co., and $26.1 billion Texas Employees Retirement System, as well as $177.8 billion Florida State Board of Administration, Tallahassee; $8.3 billion Rhode Island Employees' Retirement System, Providence; $4.2 billion Colorado Fire & Police Pension Association, Greenwood Village; and $2 billion Alfred P. Sloan Foundation, New York.

The AOI steering committee oversees an aggregate $960 billion in assets, of which about $75 billion is invested in hedge funds, said Melissa Santaniello, founder of the organization, in an interview. Ms. Santaniello also works as an independent consultant.

AOI's “hedge fund principles are a great way for us to work together with other investors and with (hedge fund) managers to improve terms, governance and transparency,” said Anne-Marie Fink, chief investment officer of the Rhode Island pension fund, in a news release.

Formed in 2009, AOI is something of a “grass-roots, underground volunteer group” of like-minded institutional investors who wanted fairer terms from hedge fund managers, Ms. Santaniello said.

“There are no conflicts,” Ms. Santaniello said, because membership to the non-profit group is restricted to hedge fund investors.