Nick Raphaely, executive director of Ashton Advisors, which has links to the highly successful Paulson funds in the US, said Paulson's four pillars of running a solid hedge fund stems from a transparent model that focuses on independence.

Raphaely comments that while some of the rules pertain to US hedge fund managers, lessons could also be learned and applied in an Australian context.

"First you have to register with the SEC [US Securities and Exchange Commission]… you need to disclose your positions to them on a quarterly basis and they monitor what you're doing.

"Next you have to have a credible, independent auditor... you have to have someone who's going to test you come audit time.

"The third thing, is that your custody has to be independent - the assets need to be held by someone other than yourself," said Raphaely.

Last but not least, it's critical for a fund manager to hire a "strong, independent" administrator, he said.

Ashton's feeder funds into the Paulson products reaped as much as 30 per cent plus returns for example for the year to May (Ashton-Paulson Event Driven Fund). As such it's no wonder investors and fellow managers alike are closely monitoring the way the US hedge fund manager conducts its business.

Locally, Ashton Advisors is looking to make the Ashton-Paulson funds available to retail investors by the first quarter of next year.

The manager is now on the hunt for a Responsible Entity in its next phase to make all three Ashton-Paulson funds, including the Recovery, Credit Opportunities and Event-Driven Fund, available to advisers and their retail clients.

All three funds are currently only available in wholesale format.

Raphaely said the firm had initially contemplated creating a hedge fund of funds that hosts all three products. But instead, they chose to go down the alternate route of creating retail PDSs and offering the funds individually to allow investors the choice of how much exposure and which sectors they wanted to tap.

"We've seen strong demand in the retail space...we chose this way [so] people can make their own decisions," said Raphaely.