1.  The investment strategy to be applied by the Hedge Fund manager must be clearly documented and understood by those executing it. The investment strategy should also be disclosed to investors.

1.  Such disclosure usually appears in the Hedge Fund’s offering document and should contain an explanation of how funds are to be invested, what factors will influence investment performance and what risks are associated with a particular investment strategy. The Hedge Fund manager must be cognisant of these matters and communicate them effectively internally.

The Hedge Fund manager should:

1. set out the investment objectives of the strategy;
2. identify any constraints the strategy imposes, e.g. types of products traded, size, amount of leverage, geographical and market limitations, position and risk limits;
3. identify the main risks and evaluate how such risks should be managed (i.e., avoidance, hedging or the decision to accept that risk);
4. comply with any applicable investment, legal, fiscal or regulatory constraints, including local market regulations and identify how such constraints affect the execution of the investment strategy;
5. have due regard to the offering document issued in connection with the relevant Hedge Fund and meet the legal and/or regulatory requirements imposed by the Hedge Fund itself because of its home or listing jurisdiction;
6. ensure that any additional restrictions arising out of marketing material are monitored;
7. communicate material changes to the investment strategy on a timely basis; and
8. ensure that the investment strategy is documented and kept up to date.

2.  The Hedge Fund manager should be satisfied that the service providers have the requisite level of expertise and technology to deliver the services required to support the investment strategy and investor base effectively.
[See also Section E2 (1)]

2.  Particular considerations should include:

1. the size and expected growth of funds under management;
2. the complexity of the instruments to be traded;
3. the structural complexity of the fund, e.g., side pockets, the number of share classes, foreign exchange hedging etc;
4. the number of locations; and
5. the number and type of investors.