IOSCO Technical Committee Conference, TokyoNovember 8-9, 2007

PANEL 5Approaches towards Alternative Investments – Regulation of hedge funds in the United States

John G. GainePresidentManaged Funds Association

About MFA

• Founded in 1991.

• Only U.S.-based, global membership organization dedicated to the hedge fund industry.

• Members include hedge funds, fund of hedge funds and managed futures funds.

Sound Practices for Hedge Fund Managers

• First document in 2000.

• 2007 edition is in its fourth iteration.

• Was prepared in response to President’s Working Group on Financial Markets (PWG).

• Several iterative improvements from prior versions.

MFA’s Three Pillars

• Market self-discipline.

• Tailored but interoperable approaches to sound practices.

• The wholesale approach.

Market self discipline

• Market-discipline is necessary to sound risk management.

• Ongoing dialogue among market participants is essential.

• Participants and regulators must keep talking in order to dispel market concerns and reduce risk.

Tailored but interoperable approaches to sound practices

• One size does not fit all.

• Multiple open consultations and dialogue are key.

• Regulators and industry associations should not prescribe structure.

The wholesale approach

• Alternative investments are risky; regulators should not forget that fact.

• MFA does not support retailization.

• Savvy investors vs. retail investors.