For Immediate Release Wednesday, March 15, 2006
For More Information, Please Contact:
Lauren Dobbs, ISDA Press Office, Singapore, +65 68364766; Lauren@kennedycom.com
Scott Marra, ISDA New York, 212-901-6013, smarra@isda.org
ISDA Publishes 2006 Fund Definitions
SINGAPORE, Wednesday, March 15, 2006 – At
its Annual General Meeting here today, The International Swaps and Derivatives
Association (ISDA) announced publication of the 2006 ISDA Fund Derivatives
Definitions. The Fund Definitions are intended for use in confirmations of
derivatives transactions linked to interests in various types of pooled investment
vehicles, such as hedge funds and mutual funds, for which a liquid secondary
market may not exist.
Fund derivatives are a rapidly growing segment of the privately negotiated
derivatives business, and enable firms to innovate and more efficiently create
customized investment products. Asset managers use fund derivatives to create synthetic
access to funds, without incurring the costs of setting up new funds. Smaller
banks and private banks also use them to provide clients with principal
protected products linked to hedge funds. For investors, fund derivatives
provide a more efficient method of accessing the asset class and can be used in
products with a lower level of risk than direct investment in a hedge fund.
“ISDA’s publication of a standard documentation tool-kit for use in fund derivatives is another step in our on-going efforts to improve operational efficiency and reduce risks in the privately negotiated derivatives business,” said Robert Pickel, Chief Executive Officer and Executive Director, ISDA. “It will enable further innovation and improve liquidity in a rapidly emerging segment of the business.”
The Fund Definitions are a streamlined version of the 2002 ISDA Equity Derivatives
Definitions, tailored to account for the particular valuation and settlement
characteristics of fund interests. For example, the Fund Definitions provide
two new methods – the Reported Value Method and the Deemed Payout Method --
for valuation of fund interests as an alternative to the methodology of the
2002 Definitions, which is more suitable for equity securities whose value
is primarily derived from secondary market transactions.
In addition, because of variability in the times and methods by which funds value and distribute proceeds with respect to redemptions of fund interests, the Fund Definitions provide terminology to assist in scheduling valuations by defining “redemption proceeds” as well as specific terms for valuation and redemption dates. The Fund Definitions also define Extraordinary Fund Events that are peculiar to funds and provide a menu of alternatives that may be used to specify the consequences of any particular Extraordinary Fund Event.
ISDA, which represents participants in the privately negotiated derivatives industry, is the largest global financial trade association by number of member firms. ISDA was chartered in 1985, and today has approximately 700 member institutions from 50 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association's web site: www.isda.org.
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is a registered trademark of the International Swaps & Derivatives Association,
Inc.