A task force of the Independent Directors Council, comprised of independent fund directors and advisory firm representatives, has issued a report on board oversight of fund investments in derivatives. The July 2008 report, which is designed to provide an overview of derivatives and practical guidance to fund directors, discusses:

  • board oversight responsibilities;
  • definitions and primary categories of derivatives;
  • portfolio management applications, risks, and controls;
  • operational and regulatory considerations (such as custody and collateral, senior securities and asset segregation, valuation, taxation, and accounting and financial reporting); and
  • board practices and resources.

The report also includes various appendices, which provide a detailed list of potential topics for board-adviser discussions regarding the fund’s derivatives investments, a glossary of terms, examples of derivatives applications, and references to additional educational resources.