Tue, Feb 21, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Deutsche Bank survey identifies hedge fund regulatory change as driver for greater due diligence

Monday, July 01, 2013
Opalesque Industry Upate - Deutsche Bank has identified the changing regulatory environment as the most significant factor driving the growing importance of operational due diligence amongst hedge fund investors. Deutsche Bank’s Hedge Fund Consulting Group’s second annual operational due diligence survey, which polled investors globally representing over $2.13tn of total assets, with a hedge fund allocation in excess of $724bn,shows almost three quarters rank a fund’s compliance and regulatory framework as the top priority for 2013.

Operational due diligence has continued to grow in importance and an overwhelming 70% of ODD teams now have explicit veto authority in the investment decision making process, which was exercised in almost 10% of manager reviews. In a further sign of the influence ODD teams now hold, 63% of investors won’t reconsider investing in a fund previously vetoed by the ODD team.

Further highlights of the survey include:

  • Investors are placing greater emphasis on the depth and breadth of their ODD team – 80% of respondents have a dedicated ODD team and investors conduct an average of 50 manager reviews a year.
  • Investors are increasingly focused on fund expenses – The majority of respondents have little or no tolerance for expenses such as non research related travel or employee compensation being charged to the fund. 40% accept charges such as regulatory reporting.
  • Independent governance is expected – The majority of respondents prefer at least three directors on the board including two independent directors. Nearly a quarter vetoed an investment due to lack of independent governance.
  • Start-up managers need to invest in people and process – Investment in human capital and proper segregation of duties were ranked as the top two operational recommendations for start-up and emerging managers.
  • Managers should expect a thorough review of operations during the site visit – Almost 60% of investors observe daily operations during a typical ODD review, using a ‘trust but verify’ approach to validate what managers represent in their documentation.
Daniel Caplan, European Head of Global Prime Finance at Deutsche Bank, said: “Hedge Funds have seen impressive net inflows from institutional investors this year and operational due diligence teams are now a critical part of the investment decision process.”

Pam Kiernan, Global Head of Hedge Fund Consulting at Deutsche Bank, said: “This survey demonstrates the critical importance of operational due diligence to hedge funds as the industry experiences an ongoing evolution. Our results show that these teams have advanced in sophistication and provide valuable insights as to how managers can prepare for the road ahead.”

The survey polled 68 institutional investor entities globally representing over $2.13tn of total assets, with a hedge fund allocation in excess of $724bn, including consultants, endowments, public pensions, sovereign wealth funds, fund of funds, private banks and family offices. 63% of respondents manage more than $1bn in hedge fund assets under management.

Press release

bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
my art Nan Strader |   July 26, 2013 10:30:27 PM
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. People - Kuwait wealth fund head Al Saad said to step down after 14 years[more]

    From Bloomberg.com: Kuwait Investment Authority is set to name Farouk Bastaki as managing director, replacing Bader Al Saad who ran the world's fifth-largest sovereign wealth fund for 14 years, a person familiar with the matter said. The KIA, as the fund is known, is finalizing the appointment, said

  2. Manager Profile - Eddie Lampert: a painful entanglement with Sears[more]

    From Moneyweek.com: "In the long run we are all dead." Lex in the Financial Times reached for the famous quote from John Maynard Keynes in January when, after a long and unforgiving decline, the clock finally appeared to be running out on Sears, the iconic US department store group. Yet the group's

  3. Investing - Hedge funds quit Aberdeen shorts as shares begin to recover, Hedge funds' next big short: U.S. malls, O'Connor fund owns 9.5% of Protalix Biotherapeutics, U.S. hedge fund takes position in Macau hotel The 13[more]

    Hedge funds quit Aberdeen shorts as shares begin to recover From Investmentweek.co.uk: The last two hedge funds to short Aberdeen Asset Management have removed their positions, as the fund group's shares begin to show signs of recovery after a difficult few years. According to the Financ

  4. Latin America, high yields and Asia Pacific strategies dominate hedge fund returns in January[more]

    Komfie Manalo, Opalesque Asia: Latin America (+7.04%), high yield (5.63%), and Asia-Pacific (+5.06%) strategies dominated hedge fund performance in January, data provider Hennesee Fund Research said. The bottom three strategies for the mont

  5. Investing - Hedge funds loading up on this dividend stock, The biggest hedge funds have been piling into bank stocks[more]

    Hedge funds loading up on this dividend stock From Incomeinvestors.com: Hedge funds are backing up the truck on Cameco Corp stock. Billionaire Jim Simons owns 389,000 shares. Other Wall Street titans - including Ray Dalio, Ken Griffin, and Chuck Royce - have been quietly building positio