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Alternative Market Briefing

Report finds hedge fund risk management protocols strengthened

Wednesday, November 14, 2012

Beverly Chandler, Opalesque London: Hedge Fund Fundamentals has published a new educational presentation, Hedge Funds & Risk Management, drawn from the MFA's recent risk management white paper collaboration with BNY Mellon and HedgeMark.

The paper examines types of risk, including Volatility Risk, Commodity Risk, Event Risk and Tail Risk. The researchers behind the collaboration concluded that hedge funds have evolved their approach to risk and increasingly strengthened their internal risk management protocols. The authors list the following points:

  • Today, 79% of firms separate their risk manager and fund manager functions to ensure independent oversight.
  • 84% of hedge funds now use off-the-shelf risk analytics that form part of the portfolio management or trading system – hedge funds are looking to a wider array of sources to model their portfolios and protect against risk of all types.
  • Over 91% of hedge funds rely on a third-party risk management administrator for fund reporting and safe keeping to help boost investor confidence in these areas.
  • 60% of larger hedge fund managers now have an employee (or employees) dedicated solely to risk management - many managers stated that before 2008 this role was not a separate function.
  • Many funds have elevated risk officers and designated them with the position of Chief Risk Officer, placing the......................

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