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Alternative Market Briefing

Part One - Has third party administration become a necessity?

Wednesday, June 10, 2009

From Kirsten Bischoff, Opalesque New York:

In this series we will take a closer look at one of the investor-driven evolutions shaping the future of the hedge fund industry - the growing call for funds to use third party administrators.

Investor driven demands for increased operational infrastructure grew exponentially with the decline in assets across the hedge fund industry. 2008 was a rapid turnabout as funds which had set high minimum investments, high fees, or had been previously closed to new investments found themselves agreeing to investor demands in the hopes of stemming redemptions and the dreams of securing allocations. As the year closed out with the revelation of the Madoff fraud, one of the objects investors focused on with laser-like intensity - was demanding hedge funds have independent, third-party administrators.

According to research firm Carbon360, which publishes the Fund Administration Fact Book, the traditional role of the hedge fund administrator is to provide back-office support by taking responsibility for operational, accounting, and regulatory tasks, thereby allowing hedge fund managers to focus on executing their investment strategies.Source In addition to these responsibilities, administrators also provide NAV estimates which have grown from monthly reporting to weekly and even daily reporting; co......................

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