Key Concepts

1. The two overarching principles of the PWG are that (1) private pools are beneficial, and (2) the best means of maintaining the stability of the private pool market is self-discipline of the participants under the guidance of public policy makers.

2. PWG recommends that only sophisticated investors invest in private pools because a sophisticated investor is better able to assess private-pool risks and calculate the appropriate allocation for her portfolio.

3. Investors in private pools have the responsibility to do the necessary due diligence. This includes understanding how the private pool of capital operates and its risk and return characteristics. Also, investors should scrutinize the pool's managers, valuation methods, and risk management.

4. Fiduciaries such as pension funds have all the responsibilities of investors in private pools. In addition, they must make sure they act in the best interest of the beneficiaries.

5. Creditors and counterparties of private pools need to exercise self-discipline to avoid market-destabilizing defaults and constantly monitor the credit risk exposure from their dealings with private pools. They should employ stress testing and consider liquidity risk in their risk management systems.

6. Managers of private pools of capital should have appropriate systems for gathering information, evaluating positions, and managing risk. They should provide accurate and adequate information to the market.

7. Supervisors must communicate their expectations regarding management of credit exposures. They should see that private pools are updating their risk management systems, and supervisors should seek international policy collaboration and coordination when appropriate.

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