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Alternative Market Briefing

Over 50% of hedge funds expected to require daily NAV reporting, operational integrity is the newest asset raising requirement

Thursday, November 12, 2009

From Kirsten Bischoff, Opalesque New York:

In a historic display of hedge fund investor strength, demand for increased transparency drove fund firms hoping to grow assets in the post-Madoff era to adopt third party administration as a "best practice", minimum standard even without a formal regulatory requirement.

The use of third party administrators may wind up being the most enduring cost of the liquidity and fraud issues the industry faced during 2008. Over the past months some of the largest, most well known firms have announced the use of third party administrators - however many opted to keep this to "NAV-lite", or month-end reporting that serves only to shadow internal administration groups that remain in place.

New research from TABB Group shows the administration industry is expected to roll through yet another growth cycle as frequency of daily net asset value (NAV) calculations will increase to include more than half the hedge fund industry (climbing to 56% of hedge funds). "Hedge funds are seeking the best possible resources, including people, processes and technology, so they can meet and exceed the demands of the industry's changing landscape," says Adam Sussman, Director of Research at the firm.

Evaluating the operational integrity of administrators Asset losses within the administration industry mimicked those of the hedge fund industry, and some admin......................

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