ASIC RG 240 — ASIC Regulatory Guide – RG 240 Hedge funds: Improving disclosure

Page 1 REGULATORY GUIDE 240 Hedge funds: Improving disclosure March 2026 About this guide This guide is for those involved in the issue and sale of hedge funds. It sets out our guidance for improved disclosure to investors to help them understand and assess these products. In seeking to improve disclosure, ASIC aims to ensure that investors and their advisers have the information they need to make an informed investment decision. However, this should not be regarded as an indication that we consider these products to be suitable for all or most retail investors. Page 2 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 2 About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This guide was issued in March 2026 and is based on legislation and regulations as at the date of issue. In March 2026, we made amendments to reflect renamed Regulatory Guide 168 Product Disclosure Statements: Disclosure and other obligations (RG 168), remove out-of-date information and align with current style and drafting practices. Previous versions:  Superseded Regulatory Guide 240, issued 18 September 2012, reissued May 2013, October 2013 and October 2022 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements. Page 3 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 3 Contents A Overview ........................................................................................... 4 Who this guide applies to................................................................... 4 Improving disclosure for hedge funds .............................................. 11 Benchmarks and disclosure principles for hedge funds .................. 12 Form and method of disclosure ....................................................... 14 B Benchmarks for hedge funds ....................................................... 16 Benchmark 1: Valuation of assets ................................................... 16 Benchmark 2: Periodic reporting ..................................................... 17 C Disclosure principles for hedge funds ........................................ 19 Disclosure Principle 1: Investment strategy ..................................... 19 Disclosure Principle 2: Investment manager ................................... 20 Disclosure Principle 3: Fund structure ............................................. 21 Disclosure Principle 4: Valuation, location and custody of assets... 22 Disclosure Principle 5: Liquidity ....................................................... 24 Disclosure Principle 6: Leverage ..................................................... 24 Disclosure Principle 7: Derivatives .................................................. 26 Disclosure Principle 8: Short selling ................................................ 26 Disclosure Principle 9: Withdrawals ................................................ 27 D Form and method of disclosure ................................................... 28 How to disclose against the benchmarks and apply the disclosure principles .......................................................................................... 28 Content of a PDS ............................................................................. 29 Ongoing disclosure .......................................................................... 30 Appendix 1: List of prescribed foreign regulatory authorities ......... 34 Appendix 2: Illustration of interposed entities ................................... 36 Key terms ............................................................................................... 38 Related information ............................................................................... 41 Page 4 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 4 A Overview Key points Hedge funds can pose more complex risks for investors than traditional funds. This is because of their diverse investment strategies, in many cases involving the use of leverage, and complex and offshore structures. The benchmarks and disclosure principles in this guide set out the specific features and risks of hedge funds that we think should be addressed in a Product Disclosure Statement (PDS) for these products. The benchmarks and disclosure principles are designed to improve disclosure so that investors can make more informed decisions about investing in products of this kind, and to make comparisons between the products and business models of different funds more straightforward. In seeking to improve disclosure, we aim to ensure that investors have the information they need to make an informed investment decision. However, this should not be regarded as an indication that we consider these products to be suitable for all or most retail investors. Disclosing against the benchmarks and applying the disclosure principles should be: • addressed upfront in the PDS; and • updated in ongoing disclosure as material changes occur (e.g. in a supplementary PDS). Who this guide applies to RG 240.1 This guide is for fund operators of hedge funds, and those responsible for preparing a PDS for an offer of interests in a hedge fund. RG 240.2 We encourage other issuers to disclose against the benchmarks and apply the disclosure principles when providing information to investors in similar situations, such as offers of shares in investment companies pursuing investment strategies normally associated with hedge funds or offers to wholesale investors of interests in a hedge fund: see also RG 240.24–RG 240.26. Note 1: Regulatory Guide 228 Prospectuses: Effective disclosure for retail investors (RG 228) provides guidance for those offers of securities that require a disclosure document under Ch 6D of the Corporations Act 2001 (Corporations Act). Note 2: In this guide, references to sections (s), chapters (Ch), divisions (Div) and subdivisions (Subdiv) are to the Corporations Act, unless otherwise specified. References to regulations (reg) and schedules (Sch) are to the Corporations Regulations 2001 (Corporations Regulations). Page 5 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 5 What is a hedge fund? RG 240.3 There are some characteristics that distinguish hedge funds from other managed investment schemes and corporate collective investment vehicles (CCIVs), such as the use of leverage, derivatives and short selling, or seeking returns with a low correlation to equity, bond or cash markets. These characteristics and other features of hedge funds, such as charging performance fees, mean that investors in these funds can be exposed to more complex risks than investors in funds pursuing more ‘vanilla’ investment strategies. RG 240.4 The definition of ‘hedge fund’ used in this guide closely follows the definition in ASIC Corporations (Shorter PDS and Delivery of Accessible Financial Products Disclosure by Platform Operators and Superannuation Trustees) Instrument 2022/497. A hedge fund is: (a) a registered scheme that: (i) is promoted by the responsible entity as a ‘hedge fund’; or (ii) exhibits two or more of the characteristics of a hedge fund, as set out in Table 1; or (b) a retail CCIV that: (i) is promoted by the CCIV or corporate director as a ‘hedge fund’; or (ii) exhibits two or more of the characteristics of a hedge fund, as set out in Table 1. Table 1: Characteristics of hedge funds Characteristic Description Complexity of investment strategy or structure The fund:  pursues investment strategies that aim to generate returns with a low correlation to published indices solely or predominantly comprising equities, bonds and/or cash (or similar products), or any combination of such indices; or  has a complex investment structure that invests through three or more vertically interposed entities (or two or more interposed entities if at least one of the entities is offshore) where the fund operator, or its associate, has the capacity to control the disposal of the products or two or more of the interposed entities. For this characteristic, interposed entities do not include managed investment schemes or CCIVs registered in Australia, or similar entities incorporated or registered in a prescribed foreign jurisdiction that is authorised by a prescribed foreign regulatory authority to make offers to the general public (i.e. the foreign entity or its fund operator is specifically authorised to make offers to all classes of investors). Note: The list of prescribed foreign regulatory authorities is set out at Appendix 1 Use of leverage The fund uses debt for the dominant purpose of making a financial investment. Page 6 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 6 Characteristic Description Use of derivatives The fund uses derivatives, other than:  for the dominant purpose of managing foreign exchange or interest rate risk;  for the dominant purpose of more efficiently gaining an economic exposure, through the use of exchange traded derivatives, to the underlying reference assets of those derivatives, but only on a temporary basis (i.e. less than 28 days, which cannot be extended by rolling over or replacing the derivative); or  exchange traded derivatives, provided the notional derivatives exposure of the fund does not exceed 10% of its net asset value (unless the exposure is attributable to circumstances that were not reasonably foreseeable by the fund operator, such as unforeseen market movements or large redemption requests, and the exposure is for a period of no more than three consecutive business days). Note: For this characteristic, derivatives include deferred purchase agreements. Use of short selling The fund engages in short selling. Charges a performance fee The fund operator or investment manager, as the case may be, has a right to be paid a fee based on the performance of the fund’s assets (this is in addition to any management fee that might be payable) if it has disclosed to investors that performance fees will be payable if the fund operator, corporate director or another person satisfies the performance criteria. RG 240.5 The definition of ‘hedge fund’ and ‘fund of hedge fund’ (see RG 240.18) uses the expression ‘promoted by’. Promotion by an issuer includes any promotion caused or authorised by the issuer. Therefore, if an issuer (or anyone authorised by the issuer) uses the term ‘hedge fund’ in any promotional material, including in disclosure documentation, it is a hedge fund for the purposes of this guide. RG 240.6 A fund may exhibit two or more of the characteristics in Table 1 in relation to a single activity—for example, using a derivative to obtain a short exposure. In these circumstances, we consider that this would only constitute a single characteristic (i.e. the derivatives characteristic) in determining whether the fund is a hedge fund for the purposes of this guide. RG 240.7 Many funds do not engage in the relevant strategies covered by the characteristics in Table 1, but the fund’s constitution may reserve the right to do so. These rights (if not used) do not trigger classification as a hedge fund unless and until the strategy is used. However, we would encourage the issuer to disclose against the relevant benchmarks and apply the disclosure principles if the fund will, from time to time, manifest two or more of the characteristics in Table 1. Complexity of investment strategy or structure RG 240.8 In determining whether a fund has a complex investment structure that invests through three or more vertically interposed entities (or two or more interposed entities if at least one of the entities is offshore), the calculation of Page 7 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 7 the number of interposed entities through which the fund acquires an economic interest in a financial product is to be performed by reference to each separate vertical stream of interposed entities. Note: See Appendix 2 for further illustration of these concepts. RG 240.9 A fund may pursue a balanced investment strategy that is not correlated with a single equities, bonds or cash index, but rather is intended to be correlated with a basket of indices covering equity, bond or cash markets. We consider that such a strategy does not trigger classification as a hedge fund. RG 240.10 In determining whether a hedge fund pursues an investment strategy that is correlated with a relevant index, the index must be widely used throughout the industry. We do not consider that this includes, for example, proprietary indices developed by a hedge fund operator (or an associated entity) for its own use, regardless of whether the index is published. Use of derivatives RG 240.11 Not all uses of derivatives will characterise a fund as a hedge fund. Three exceptions allow a fund to use derivatives without triggering characterisation as a hedge fund. These are: (a) derivatives used for the dominant purpose of managing foreign exchange or interest rate risk; (b) derivatives used for the dominant purpose of more efficiently gaining an economic exposure, through the use of exchange traded derivatives, to the underlying reference assets of those derivatives, but only on a temporary basis (i.e. less than 28 days, which cannot be extended by rolling over or replacing the derivative); or (c) exchange traded derivatives, provided the notional derivatives exposure of the fund does not exceed 10% of its net asset value (unless the exposure is attributable to circumstances that were not reasonably foreseeable by the fund operator, such as unforeseen market movements or large redemption requests, and the exposure is for a period of no more than three consecutive business days). RG 240.12 These three exceptions operate independently of each other. For example, if a fund uses exchange traded derivatives for the dominant purpose of managing foreign exchange or interest rate risk, this does not count towards the 10% notional derivatives exposure limit for exchange traded derivatives in RG 240.11(c). RG 240.13 When derivatives are used on a temporary basis for the dominant purpose of gaining more efficient economic exposure to the underlying reference assets, ae fund will not trigger the hedge fund characterisation simply because the derivative has a term of more than 28 days, but it will trigger the characterisation if the position is not closed-out within 28 days. Page 8 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 8 RG 240.14 The ‘notional derivatives exposure’ of a fund to derivatives means the sum of the absolute short and long notional principal amounts of all derivatives, adjusted for any offsetting exposures on the same asset on the same terms. Note: For example, assume a fund has a $100 long exposure in one asset (asset A) and $100 short exposure in another asset (asset B). The fund enters into a $20 short position on asset A and on the same terms to partly close-out the long position. The fund’s notional derivatives exposure would therefore be $180—that is, $80 absolute exposure on asset A (comprised of the $100 long exposure less $20 short exposure), plus $100 short exposure on asset B. Anti-avoidance RG 240.15 Our approach to defining what a hedge fund is includes an anti-avoidance mechanism to discourage fund operators from restructuring their activities to avoid triggering the definition (e.g. by splitting activities across different entities so that no one entity exhibits two or more of the characteristics). We will adopt a measured approach when inadvertent breaches arise. However, if we find deliberate and systemic breaches, we will take stronger regulatory action. ASIC relief RG 240.16 If a fund operator is uncertain about whether a fund is a hedge fund (or fund of hedge funds), the issuer can elect to state that they are a hedge fund and disclose against the benchmarks and apply the disclosure principles in this guide; otherwise, we would expect the issuer to seek clarification or relief from ASIC. Note: Regulatory Guide 51 Applications for relief (RG 51) provides guidance for applicants and advisers who are applying to ASIC for relief. Funds of hedge funds and significant underlying funds RG 240.17 Many hedge funds gain indirect exposure to a range of investments in financial products by investing in other vehicles (called ‘underlying funds’) that use hedge fund strategies. These vehicles may be managed investment schemes, CCIV sub-funds or companies. They may be located in Australia or offshore. RG 240.18 For the purposes of this guide, a ‘fund of hedge funds’ means a registered managed investment scheme or CCIV sub-fund: (a) where at least 35% of a fund’s assets are invested in one or more hedge funds (including a scheme or body in or outside this jurisdiction that would be a hedge fund if it were a registered managed investment scheme); or (b) that promotes itself as a fund of hedge funds. Page 9 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 9 RG 240.19 Fund operators of funds of hedge funds should make the additional or varied disclosures relating to their whole portfolio as specified in the benchmarks and disclosure principles as being appropriate for funds of hedge funds. RG 240.20 The benchmarks and disclosure principles in this guide cover a range of disclosures relating to the fund operator, the fund, the individuals making the investment decisions, service providers, fund strategies and fund assets. Where a hedge fund has invested in one or more significant underlying funds (being an underlying fund that accounts for 35% or more of the fund of hedge fund’s assets), the benchmarks and disclosure principles in this guide should be taken to apply to each such significant underlying fund on a ‘look-through’ basis. RG 240.21 In these cases, fund operators of funds of hedge funds should disclose against the benchmarks and apply the disclosure principles for each such significant underlying fund and its investments, unless otherwise indicated in the benchmarks and disclosure principles. These disclosures would be in addition to disclosures for the fund of hedge funds operated by the fund operator. RG 240.22 Where a hedge fund invests in a number of underlying funds with common or related managers, each of those investments should be aggregated for the purposes of determining whether the 35% significant underlying fund threshold is satisfied. If, when aggregated, the hedge fund’s investments meet or exceed the 35% threshold for a single underlying fund or group of related underlying funds, the issuer should disclose against the benchmarks and apply the disclosure principles for each such significant underlying fund or group of related funds. RG 240.23 Where a hedge fund or fund of hedge funds gains economic exposure through a financial instrument such as a swap or deferred purchase agreement to an underlying fund, the disclosure principles set out in this guide should be applied on a look-through basis, though full disclosure should be made on the intermediate layer or layers, including the identity of the counterparty, the product’s material terms and any leverage created through the instrument. Application to other products RG 240.24 While the benchmarks and disclosure principles in this guide are primarily directed at PDSs for hedge funds, we consider that there may be other entities and circumstances that pose similar types of risks to investors. We encourage issuers to disclose against the benchmarks and apply the disclosure principles when providing information to investors in similar situations, such as: (a) similar offers to wholesale investors; and Page 10 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 10 (b) offers by investment companies that have some of the features of hedge funds. RG 240.25 If a fund could be characterised as a hedge fund or fund of hedge funds but also falls more specifically within a category of funds covered by certain other ASIC disclosure guidance, we would expect the funds to follow that other more specific disclosure guidance. This includes funds that are subject to any of the following regulatory guides: (a) Regulatory Guide 45 Mortgage schemes: Improving disclosure for retail investors (RG 45); (b) Regulatory Guide 46 Unlisted property schemes: Improving disclosure for retail investors (RG 46); (c) Regulatory Guide 148 Platforms that are managed investment schemes and nominee and custody services (RG 148); (d) Regulatory Guide 231 Infrastructure entities: Improving disclosure for retail investors (RG 231); or (e) Regulatory Guide 232 Agribusiness managed investment schemes: Improving disclosure for retail investors (RG 232). RG 240.26 We also encourage issuers to consider any applicable industry standards. RG 240.27 Where a private equity fund exhibits two or more of the characteristics of a hedge fund, as set out in Table 1, we would not expect that private equity fund to disclose against the benchmarks and apply the disclosure principles in this guide. Interaction with the shorter PDS regime RG 240.28 The shorter PDS regime applies to ‘simple managed investment schemes’— that is, a scheme that can realise 80% of its assets at market value within 10 days. Subdivision 4.2D of the Corporations Regulations 2001 (Corporations Regulations) applies to ‘simple sub-fund products’—that is, a security in a CCIV that meets the criteria in reg 1.0.02(1), including that the CCIV in respect of the sub-fund can realise 80% of its assets at market value within 10 days. Note: For more information about the shorter PDS regime, see Regulatory Guide 168 Product Disclosure Statements: Disclosure and other obligations (RG 168) at ‘Shorter PDS regime’ in Section C. RG 240.29 A hedge fund may be able to realise 80% of its assets at market value within 10 days and fall within the definition of a ‘simple managed investment scheme’ or ‘simple sub-fund’. However, due to the complexity of hedge fund strategies and investment structures, and the nature of hedge fund investment exposures or activities, we consider the requirements of the shorter PDS regime are not appropriate to ensure that the issuer of a hedge Page 11 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 11 fund discloses sufficient information to allow an investor to have the information they reasonably need to make an informed investment decision. RG 240.30 ASIC Instrument 2022/497 specifically excludes hedge funds and funds of hedge funds from the shorter PDS regime. The definition of hedge fund used in this guide closely follows the approach taken in that instrument. This means that we expect all hedge funds and funds of hedge funds to disclose against the benchmarks and apply the disclosure principles in this guide, regardless of whether the fund meets the definition of a ‘simple managed investment scheme’ or ‘simple sub-fund’. Improving disclosure for hedge funds The role of disclosure RG 240.31 The disclosure framework in the Corporations Act requires the issuer of a hedge fund to: (a) disclose upfront to retail investors all the information they reasonably need to know to make a decision about whether or not to acquire the product; (b) provide ongoing disclosure about material matters to help retail investors monitor whether their expectations are being met; and (c) provide periodic disclosure of information that the issuer reasonably believes the investor needs to understand their investment in the hedge fund. RG 240.32 Our disclosure guidance is not designed to stop or discourage retail investors from taking investment risks, but to help them understand the risks involved in any particular investment or type of investment. This enables them to make a more informed decision about whether the potential reward (the return on their investment) warrants the level of risk involved. This approach should also lead to comparable disclosure by hedge funds, helping investors to compare investments in this sector. RG 240.33 Given the risks for retail investors associated with investing in hedge funds, and that many rely on disclosure material to inform their decisions to invest, we think it is necessary to ensure that disclosure provides retail investors with the information they need to make an informed decision about whether or not to invest. Page 12 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 12 The need for better disclosure to investors RG 240.34 Our guidance has been prompted by our experience that, in some cases, inadequate disclosure has contributed to investors not understanding the risks when purchasing a hedge fund product. RG 240.35 Hedge funds have a different risk profile (including counterparty and liquidity risk) to other financial asset funds. Issuers of hedge funds and their managers may: (a) invest in many types of financial products across diverse markets and in non-mainstream and often less liquid asset classes; (b) use a wider variety of complex investment techniques and more complex investment structures than traditional funds; and (c) borrow money to leverage the funds’ investments or invest in assets with embedded leverage, which amplifies the prospects of both significant positive returns and significant losses. RG 240.36 Each hedge fund is different, so the PDS is a key mechanism for making sure that investors understand the investments and strategies the investment manager will be using. RG 240.37 Inadequate disclosure occurs when the information required to be disclosed under the Corporations Act: (a) is not included in the PDS; or (b) is included in the PDS, but is not clear, concise and effective (e.g. the information is presented in such a dense and complex way that investors are unlikely to understand the true nature of the investment). This problem can be exacerbated if advertising and other sales practices do not highlight risks and thus give a misleading impression of the product. Benchmarks and disclosure principles for hedge funds RG 240.38 We have identified benchmarks (see Table 2) and disclosure principles (see Table 3), which address the key issues that we think should be: (a) highlighted in PDS disclosure relating to hedge funds; and (b) discussed in a manner that allows prospective retail investors to make an informed decision about whether to invest. Page 13 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 13 Table 2: Summary of benchmarks for hedge funds Benchmark Description 1 Valuation of assets This benchmark addresses whether valuations of the hedge fund’s non-exchange traded assets are provided by an independent administrator or an independent valuation service provider. 2 Periodic reporting This benchmark addresses whether the issuer will provide periodic disclosure of certain key information on an annual and monthly basis. Table 3: Summary of disclosure principles for hedge funds Disclosure principle Description 1 Investment strategy This disclosure principle is intended to ensure that investors are made aware of the details of the investment strategy for the fund, including the type of strategy, how it works in practice and how risks are managed. 2 Investment manager This disclosure principle is intended to ensure that investors have the necessary information about the people responsible for managing the fund’s investments, such as their qualifications and relevant commercial experience, and the proportion of their time devoted to the hedge fund. 3 Fund structure This disclosure principle is intended to ensure that the issuer explains the investment structures involved, the relationships between entities in the structure, fees payable to the fund operator and investment manager, the jurisdictions involved (if these involve parties offshore), the due diligence performed on underlying funds, and the related party relationships within the structure. 4 Valuation, location and custody of assets This disclosure principle is intended to ensure that the issuer discloses the types of assets held, where they are located, how they are valued and the custodial arrangements. 5 Liquidity This disclosure principle is intended to ensure that investors are made aware of the fund’s ability to realise its assets in a timely manner and the risks of illiquid classes of assets. 6 Leverage This disclosure principle is intended to ensure that investors are made aware of the maximum anticipated level of leverage of the fund (including leverage embedded in the assets of the fund). 7 Derivatives This disclosure principle is intended to ensure that investors are made aware of the purpose and types of derivatives used by the fund operator or investment manager, and the associated risks. 8 Short selling This disclosure principle is intended to ensure that investors are made aware of how short selling may be used as part of the investment strategy, and of the associated risks and costs of short selling. 9 Withdrawals This disclosure principle is intended to ensure that investors are made aware of the circumstances in which the issuer of the hedge fund allows withdrawals and how this might change. Page 14 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 14 Form and method of disclosure RG 240.39 Our disclosure model for hedge funds consists of a combination of disclosure principles and ‘if not, why not’ benchmarks. Each benchmark and disclosure principle identifies a key risk area that potential investors should understand before making a decision to invest. RG 240.40 Failure to disclose against the ‘if not, why not’ benchmarks and apply the disclosure principles will result in an increased risk of a PDS not making the disclosure required by the Corporations Act, or not being ‘clear, concise and effective’. If we consider investors have been misled or deceived, or have not received the information required by the Corporations Act, ASIC may issue a stop order for the offer or take other action: see RG 168 at ‘When product issuers do not comply with PDS requirements’ in Section D for more information. RG 240.41 Where we have provided guidance on an ‘if not, why not’ benchmark in relation to a particular risk or feature, the issuer should state in the PDS and other disclosures whether it meets the benchmark and if not, why not. RG 240.42 This model of disclosure provides standards by which retail investors can assess financial products for which there are typically few such external benchmarks. Note: If the issuer cannot meet all aspects of a benchmark, it should state that it does not meet the benchmark and clearly explain which aspects it meets and, for those it does not meet, explain why not and how it deals with the associated risks in another way. RG 240.43 Failing to meet one or more of the benchmarks does not mean that a product provided by a particular issuer necessarily represents a poor investment. However, the issuer will need to explain what alternative measures it has in place to mitigate the concern underlying the benchmark. RG 240.44 Where we have provided guidance on a disclosure principle, this identifies a particular feature or risk of hedge funds that we consider an issuer should clearly and prominently address in the PDS. This disclosure will help retail investors to understand the significant benefits, risks and features of the fund. RG 240.45 Where Benchmark 1 or Disclosure Principles 6, 7 or 8 are not relevant (e.g. the particular feature does not apply to a fund or the fund does not engage in the particular activity), the PDS need not address that benchmark or disclosure principle. Also, a number of specific disclosures referred to in Benchmark 2 or the disclosure principles may not be relevant to particular funds, in which case issuers need not disclose against them. For instance, if the fund does not employ leverage, the issuer need not disclose the leverage ratio as required by Table 4. Similarly, if the fund does not use an external liquidity facility to provide member redemptions, it need not disclose against RG 240.96(c). Page 15 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 15 RG 240.46 The benchmark and disclosure principle information should be: (a) addressed upfront in the PDS; (b) updated in ongoing disclosure as material changes occur (e.g. in a supplementary PDS); and (c) supported in, and not undermined by, advertising material. RG 240.47 We expect issuers to clearly and prominently disclose a summary of the information identified in the benchmarks and disclosure principles in the first few pages of the PDS, with cross-references to where further information can be found in the PDS: see Section D. RG 240.48 In the interests of ensuring that existing investors are well informed, an issuer may also choose to provide regular reports on this information in other materials (e.g. monthly or quarterly updates), although providing updates in this form will not relieve the issuer from its disclosure obligations if any material changes occur. An issuer may, when updating certain information that is not materially adverse from the viewpoint of an investor, rely on ASIC Corporations (Updated Product Disclosure Statements) Instrument 2016/1055 to provide updates on a website if the PDS states that this may occur. RG 240.49 We believe that our approach balances: (a) issuers’ obligation to make available disclosure that helps investors make better informed decisions about investing in hedge funds; (b) our requirement to not unduly interfere with the strategies used by hedge funds and flexibility of the market in raising funds; and (c) our mandate to promote efficiency in Australia’s capital markets. Note: The need to strike an appropriate balance between promoting confident and informed investors and financial consumers and allowing markets to operate freely is part of ASIC’s mandate under the Australian Securities and Investments Commission Act 2001. RG 240.50 Our experience indicates that investors need better quality and relevant disclosure, presented in a way best suited to investor understanding. Page 16 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 16 B Benchmarks for hedge funds Key points Issuers of hedge funds should address benchmarks on the following matters in disclosures to retail investors: • valuation of assets; and • periodic reporting. This information should be disclosed clearly and prominently in the PDS and ongoing disclosure for the hedge fund: see Section D. Benchmark 1: Valuation of assets RG 240.51 The fund operator has and implements a policy that requires an independent administrator or an independent valuation service provider to provide valuations of the hedge fund’s assets that are not exchange traded. Explanation RG 240.52 This benchmark is intended to support investor confidence in the value of the hedge fund’s non-exchange traded assets. The use of independent (i.e. unrelated to the fund operator or investment manager of the fund) administrators or valuation service providers is now widespread, driven largely by investor concerns about the potential for manager misconduct when these functions are performed in-house. RG 240.53 While there is often justification (including cost efficiencies) for fund operators to perform administration or valuation activities, we consider it appropriate for a fund operator that elects not to use independent service providers to perform these functions to advise investors of this fact and tell them why. RG 240.54 If the fund operator does not meet this benchmark, it should explain why not and how it addresses the risks of the lack of independence in valuations and related party conflicts of interest in connection with valuations. RG 240.55 The use of an independent third party to value the fund’s assets does not relieve the fund operator from its liability to members in the event these services are not properly performed: see s601FB(1) of the Corporations Act. Further, the fund operator should maintain sufficient expertise to monitor the performance of any asset valuation services provided by third parties. Page 17 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 17 RG 240.56 Issuers of funds of hedge funds should disclose their policy on the use of independent fund administrators or valuation service providers by managers of underlying funds. Note: We provide further guidance on the use of service providers in the valuation of assets in Regulatory Guide 94 Unit pricing: Guide to good practice (RG 94) at paragraphs 4.6 and 5.1. Benchmark 2: Periodic reporting RG 240.57 The issuer has and implements a policy to provide periodic reports on certain key information, as set out in Table 4. Table 4: Periodic reporting of key information Annual (or more frequent) reporting The issuer has and implements a policy to report on the following information as soon as practicable after the relevant period end:  the actual allocation to each asset type (see RG 240.74(b));  the liquidity profile of the portfolio assets as at the end of the period—the representation of asset liquidity (the estimated time required to sell an asset at the value ascribed to that asset in the fund’s most recently calculated net asset value) in a graphical or other form that allows easy comparison with the maturity profile of the liabilities;  the maturity profile of the liabilities as at the end of the period—the representation of maturities in a graphical form that allows easy comparison with the liquidity profile of the portfolio assets;  the leverage ratio (including leverage embedded in the assets of the fund, other than listed equities and bonds) as at the end of the period;  the derivative counterparties engaged (including capital protection providers);  the monthly or annual investment returns over at least a five-year period (or, if the hedge fund has not been operating for five years, the returns since its inception); and  the key service providers if they have changed since the latest report given to investors, including any change in their related party status (see RG 240.71(b)). This information must be given to members as often as, and no later than or as soon as practicable after, any periodic statement required by s1017D (but in any event no later than six months after the end of the relevant period). Note: The information required by this benchmark is in addition to any other specific information required for periodic disclosure under the Corporations Act: see RG 240.120– RG 240.121. Ongoing availability The latest report, which addresses the above matters, is available on the hedge fund’s website. Page 18 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 18 Monthly updates The following information is available on the hedge fund’s website and is disclosed monthly or, if less often, at least as often as investors have the right to redeem their investments and in reasonable time to allow investors to consider that information in making a decision whether to redeem their investment:  the current total net asset value of the fund and the redemption value of a unit in each class of units as at the date the net asset value was calculated; Note: If the method of calculating net asset value is not disclosed with the monthly update, investors should be advised where that method is explained and how to access that information.  the key service providers if they have changed since the last report given to investors, including any change in their related party status; and  for each of the following matters since the last report on those matters: − the net return on the fund’s assets after fees, costs and taxes; − any material change in the fund’s risk profile; − any material change in the fund’s strategy; and − any change in the individuals playing a key role in investment decisions for the fund. Explanation RG 240.58 The Corporations Act requires a hedge fund to give investors a periodic statement at least annually: see s1017D. However, we understand that current market practice is to provide investors with more frequent reports, and we encourage issuers to do this. This benchmark sets out the matters that we consider investors are likely to have an interest in knowing at least annually. RG 240.59 We consider that investors are also likely to want to monitor basic investment performance information on their hedge fund investments more often than annually. The benchmark is designed to ensure that investors receive timely, basic fund investment performance information to enable them to closely monitor the ongoing performance of their hedge fund investments and decide on an informed basis whether to stay in or exit their investments. If returns paid to investors over the reporting period are funded other than from investment returns from the fund’s assets, this should be clearly stated together with the resulting impact on the redemption value on a per-unit basis for each class of units in the fund. RG 240.60 If the issuer does not meet this benchmark, it should explain why not and state its policy on what information will be provided, how and when. RG 240.61 For funds of hedge funds to meet this benchmark, the issuer should disclose against this benchmark in relation to any significant underlying fund, in addition to disclosing in relation to the fund of hedge funds. Page 19 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 19 C Disclosure principles for hedge funds Key points Issuers of hedge funds should provide information about the following matters in disclosures to retail investors: • investment strategy; • investment manager; • fund structure; • valuation, location and custody of assets; • liquidity; • leverage; • derivatives; • short selling; and • withdrawals. This information should be disclosed clearly and prominently in the PDS and ongoing disclosure for the hedge fund: see Section D. Disclosure Principle 1: Investment strategy RG 240.62 The issuer should disclose the following information: (a) a description of the fund’s investment strategy, including: (i) the typical asset classes to be invested in; (ii) the typical location and currency denomination of the assets; and (iii) the role of leverage, derivatives and short selling; Note: For other related disclosures, see Disclosure Principle 6, Disclosure Principle 7, and Disclosure Principle 8. (b) an explanation of how the strategy will produce investment returns; (c) any key dependencies or assumptions underpinning the strategy’s ability to produce investment returns (e.g. market conditions or interest rates); (d) what the diversification guidelines or limits are; (e) any specific risks associated with the relevant investment strategy; (f) disclosure of the key aspects of the fund’s risk management strategy; and (g) if and how the investment strategy can change and what notification would be provided to investors. Page 20 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 20 Explanation RG 240.63 A clear and concise explanation of the fund’s investment strategy is a key requirement to enable an investor to make an informed decision about whether to invest in the fund. RG 240.64 This disclosure principle is intended to ensure that investors are made aware of the details of the investment strategy for the fund, including the type of strategy, how it works in practice, and how risks are managed. The explanation of the fund’s investment strategy should provide sufficient detail for an investor to understand the particular risks involved, and give context to other disclosures—for example, to assess the competency of key investment decision makers to execute the investment strategy. RG 240.65 For funds of hedge funds, the issuer should apply this disclosure principle as though the reference to ‘asset’ at RG 240.62(a)(i) reads ‘underlying fund’ and need not provide the information in RG 240.62(a)(ii) in addition to the disclosures set out at RG 240.74. RG 240.66 Issuers of funds of hedge funds should also provide sufficient information to explain the strategy for selecting which underlying funds they will invest in and their due diligence process in the selection of underlying funds. Further, for each investment in an underlying fund that exceeds 10% of the hedge fund’s assets, the issuer should explain why that particular underlying fund was selected and how it fits with the investment strategy. Disclosure Principle 2: Investment manager RG 240.67 The issuer should disclose a description of the following: (a) the identity of, and information on any relevant significant adverse regulatory findings against, any investment manager appointed by the issuer of the hedge fund; (b) the identities, relevant qualifications and commercial experience (including information on any relevant significant adverse regulatory findings against) of any individuals playing a key role in investment decisions and the proportion of their time each will devote to executing the fund’s investment strategy; (c) if any of the assets are not managed by the issuer, any unusual and materially onerous (from an investor’s perspective) terms in the agreement or other arrangement under which any investment manager is appointed and the scope of this appointment; and Note: If the fund’s assets are managed by the issuer, the issuer should disclose any unusual and materially onerous provisions of the fund’s constitution. Page 21 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 21 (d) the circumstances in which the fund operator is entitled to terminate the investment manager’s appointment and on what terms (including any payments). Explanation RG 240.68 This disclosure principle is intended to ensure that investors have the necessary information about the people responsible for managing the fund’s investments, as well as the arrangement between the issuer and any investment manager. RG 240.69 The higher level of fees paid to investment managers of many hedge funds, the complexities of the strategies involved and the prospect held out of exceeding equity, bond or cash industry benchmarks, make the experience and qualifications of the key investment decision makers, and the time that they devote to executing the investment strategy, critical information. The PDS should relate their experience and qualifications to the fund’s strategy. RG 240.70 For funds of hedge funds, the issuer should disclose against this disclosure principle in relation to any significant underlying fund, in addition to disclosing in relation to the fund of hedge funds. Disclosure Principle 3: Fund structure RG 240.71 The issuer should disclose the following information: (a) the fund’s investment structure—that is, the key entities involved (e.g. companies, funds and limited partnerships), their relationship to each other and their roles, together with a diagram showing the flow of investment money through the structure; (b) the identities of the key service providers (e.g. investment managers, prime brokers, custodian, administrator, valuation service provider and auditor) and scope of their services, where applicable; (c) how the issuer ensures that its key service providers will comply with their service agreement obligations; (d) any related party relationships within the structure, including any related party relationships between the fund operator and the investment managers, or between the fund operator or investment managers and any underlying funds, counterparties or any key service providers (including executing brokers) to the fund; (e) the existence and nature of material arrangements in connection with the hedge fund that are not on arm’s length terms (see Regulatory Guide 76 Related party transactions (RG 76)); (f) for funds of hedge funds, the due diligence process performed on underlying funds and their key service providers; Page 22 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 22 (g) any fees and costs associated with investing in any underlying entity under Sch 10 to the Corporations Regulations, as modified by ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070; Note: We provide further guidance on fees and costs disclosure obligations in Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements (RG 97). (h) the jurisdictions of the entities involved in the fund’s structure; and (i) the risks of the structure, including any risks associated with holding assets overseas or, for funds of hedge funds, with investing in underlying funds overseas. Explanation RG 240.72 This disclosure principle is intended to ensure that the fund explains the investment structures involved, the relationships between entities in the structure, fees and other costs payable to the issuer and investment manager, the jurisdictions involved, the due diligence performed on underlying funds, and the related party relationships within the structure. RG 240.73 For funds of hedge funds, the disclosures at RG 240.71(c) and RG 240.71(e) will usually only be required for the fund of hedge funds, not for the underlying funds. Disclosure Principle 4: Valuation, location and custody of assets RG 240.74 The issuer should disclose the following information: (a) the key aspects of the valuation policy; (b) the types of assets that the fund does or may invest in and the allocation range for each asset type, using the following asset types (including the assets of underlying funds): (i) Australian listed equities; (ii) Australian unlisted equities; (iii) international listed equities; (iv) international unlisted equities; (v) Australian government bonds; (vi) Australian corporate bonds; (vii) international government bonds; (viii) international corporate bonds; (ix) structured products; (x) real property; (xi) infrastructure; Page 23 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 23 (xii) exchange traded derivatives; (xiii) over-the-counter (OTC) derivatives; (xiv) cash equivalent investments; and (xv) other (provide details); (c) any policy about the geographic location of the asset; (d) the geographic location of any material asset; and (e) the custodial arrangements, including details of the roles provided by custodians (where assets are not held by a third party custodian, the issuer should disclose the types and proportion of those assets relative to the fund’s net asset value). Explanation RG 240.75 This disclosure principle is intended to ensure that the issuer of the hedge fund discloses the types of assets held, where they are located, how they are valued and the custodial arrangements. Note: Regulatory Guide 133 Funds management and custodial services: Holding assets (RG 133) gives guidance on the standards a custodian of scheme property should meet, what the issuer should do when it appoints an agent as custodian and what should be included in a compliance plan about holding scheme property. RG 240.76 The PDS need only disclose the allocation range for those asset types in which the fund does, or may, actually invest. RG 240.77 Where a hedge fund invests in derivatives, the PDS need not disclose the allocation range for derivatives that are dealt in for the dominant purpose of managing foreign exchange or interest rate risk associated with holding some or all of the fund’s other assets. RG 240.78 For funds of hedge funds, rather than those matters set out at RG 240.74, the issuer should disclose: (a) its valuation policy; (b) the types of underlying funds (including their strategies); (c) the allocation ranges; (d) any policies on the geographic location of underlying funds, their managers or the geographic focus of their investing; (e) the custodial arrangements for the fund of hedge fund’s assets and the roles of custody providers; and (f) any policies to be applied in relation to the custodial arrangements of underlying funds. Page 24 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 24 Disclosure Principle 5: Liquidity RG 240.79 If the issuer of a hedge fund cannot reasonably expect to realise at least 80% of its assets, at the value ascribed to those assets in calculating the fund’s net asset value, within 10 days, the issuer should disclose: (a) a description of any asset class that has a value greater than 10% of the fund’s net asset value and cannot be reasonably expected to be realised at the value ascribed to that asset in calculating the fund’s most recent net asset value within 10 days; and (b) the key aspects of the liquidity management policy. Explanation RG 240.80 This disclosure principle is intended to ensure that investors are made aware of the fund’s ability to realise its assets in a timely manner and the risks of illiquid classes of assets. Disclosure about liquidity becomes even more important under stressed market conditions. RG 240.81 In addition, issuers of funds of hedge funds should describe their investment policy in relation to the liquidity of underlying funds, and explain any risks posed to the fund of hedge fund’s liquidity by the nature of these investments and how that risk will be managed. Disclosure Principle 6: Leverage RG 240.82 The issuer should disclose the following information: (a) the circumstances in which the hedge fund may use leverage and any restrictions on its use of leverage; (b) the sources of leverage, including the type, the amount and the providers of the leverage; (c) whether any assets are used as collateral, and the extent to which they are otherwise encumbered or exposed to set-off rights or other legitimate claims by third parties in the event of the insolvency of the issuer, a service or credit provider, or a counterparty; (d) the maximum anticipated and allowed level of leverage (including leverage embedded in the assets of the fund, other than leverage embedded in holdings of listed equities and bonds) as a multiple of the net asset value of an investor’s capital in the fund (e.g. for every $1 of the fund’s net asset value, the fund is leveraged $x); and Note: The maximum anticipated and allowed level of leverage may be disclosed alongside the anticipated or typical level of leverage. Page 25 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 25 (e) a worked example showing the impact of leverage on investment returns and losses, assuming the maximum anticipated level of leverage (including leverage embedded in the assets of the fund, other than leverage embedded in holdings of listed equities and bonds). Explanation RG 240.83 Leverage is the use of financial products (such as derivatives) or debt (such as a margin facility) to amplify the exposure of capital to an investment. This disclosure principle is intended to ensure that investors are made aware of the maximum anticipated and allowed level of leverage of the fund (including leverage embedded in the assets of the fund). Information about the use and extent of leverage is critical because it amplifies both positive returns and losses. RG 240.84 We expect fund issuers to disclose leverage as a gross figure (total long positions plus total short positions) even if net leverage (total long positions minus total short positions) is also disclosed. We consider that a net figure alone may not provide sufficient information to investors because a leveraged position may not be offset by an opposite position if the positions do not correlate totally (e.g. the liquidity or maturity profiles may be different). Further, counterparty risk will often not be offset. RG 240.85 We acknowledge that a leverage ratio is one of a number of ways of measuring market exposure and risk in a fund strategy or portfolio and that, for some fund strategies, these exposures are often measured using different or additional methods (e.g. value at risk). Fund issuers should consider including additional measures of market and risk exposure where relevant and capable of being explained in a clear, concise and effective manner. RG 240.86 We expect the issuer to disclose either: (a) the name of the actual provider of the leverage; or (b) the class or type of leverage provider (e.g. whether they are prudentially regulated, a local branch of a global investment bank or an unrated related party). RG 240.87 We acknowledge that when preparing a PDS, particularly for a new fund, it may be difficult for the issuer to know the anticipated level of leverage. We expect that, if the anticipated level of leverage is disclosed as a range, it should be a good faith estimate and as small as reasonably possible, given the fund’s strategy and any relevant investment history, to be meaningful to investors. RG 240.88 The issuer of a fund of hedge funds need only disclose a reasonable estimate of leverage embedded in the underlying funds (except for any significant underlying funds, in which case the issuer should disclose the anticipated level of leverage). In addition, the issuer of a fund of hedge funds should Page 26 REGULATORY GUIDE 240: Hedge funds: Improving disclosure © Australian Securities and Investments Commission March 2026 Page 26 disclose its investment policy in relation to acceptable types of leverage used by underlying funds and any limits on leverage the fund of hedge funds will set (for each fund or across its portfolio).