Fund Custody and Administration

Part 5

Introduction to derivatives

Abstract

We have seen in the previous parts that more and more use of derivatives by investment funds of all types is being made as investment managers seek to benefit from the hedging and strategy benefits these instruments can offer. It is therefore important that administrators and custodians understand the products and their characteristics so that relevant processes, procedures, and controls can be established where use is made of derivatives in the portfolio. Derivatives use will mean that administrators and custodians need to consider several important issues. For example, whether the use of the product has been authorized or is permitted under the regulatory compliance of the fund, that is, the UCITS Directive, ...