When it comes to a hedge fund’s code of ethics, there are usually three core principles that need to be mentioned: transparency, assessment and disclosures. Companies that develop a strong and efficient code of ethics – like Kingdom Ridge Capital – have a much higher chance of avoiding problems, like insider trading.
Valuation Policy
It is very important for the manager to have a well-defined valuation policies, and that has to be communicated to the investors as well. When they know that the company does everything in its power to develop a highly transparent code of ethics (COE), they are more willing to invest. Conversely, if the COE has holes in it and the reevaluation reveals this, disclosing the information to them is just as important. The responsibility includes not just the manager, but also the valuation agents that often work for a third party, as well as the administrator. The code of ethics should reflect these responsibilities.
Valuation Policy
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| Kingdom Ridge Capital Insider Trading |
It is very important for the manager to have a well-defined valuation policies, and that has to be communicated to the investors as well. When they know that the company does everything in its power to develop a highly transparent code of ethics (COE), they are more willing to invest. Conversely, if the COE has holes in it and the reevaluation reveals this, disclosing the information to them is just as important. The responsibility includes not just the manager, but also the valuation agents that often work for a third party, as well as the administrator. The code of ethics should reflect these responsibilities.
Governance Aspects
On the issue of governance, most experts agree that companies need clear policies that can be followed easily, and that describe the standards of operation and what is expected from directors, partners, managers, and administrators.
At Kingdom Ridge Capital, the leaders of the company developed a code of ethics that not only describes the company’s stance on their operations and insider trading, but also promotes the culture of compliance within the firm.
Sources:
http://www.valuewalk.com/2014/12/hedge-fund-code-ethics-developed/
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