The move was sparked by interest expressed by a panel of hedge fund professionals at ISDA's annual general meeting in Chicago earlier this month. Karl Rogers, head of legal counsel for trading and derivatives at Dresdner Kleinwort Wasserstein in London, told DW, a "[standard template] would be very useful. Funds and funds-of-funds have established themselves as a separate asset class." He explained that because of the way funds work they need separate documentation to equity or fixed income derivatives.
Documents pertaining to fund derivatives are likely to differ from those on other asset classes largely because of the concept of net asset value, which is unique to the fund industry. JPMorgan's Hailes said the docs should deal with when the NAV is published and disruptions, which may prevent that from happening. In addition, the docs should detail how a dealer can get in and out of a fund. "You don't want a payout obligation on an OTC [position] when you can't get out of your delta position to liquidate the cash," explained Hailes.