Mon, Dec 11, 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. News Briefs - Italy's Carige to sell consumer credit arm to Chenavari, Less than a year after hedge fund coup, East Bay drug maker cuts jobs, looks to move HQ[more]

    Italy's Carige to sell consumer credit arm to Chenavari Italy's Banca Carige aims to sell its consumer credit unit to London-based hedge fund Chenavari by Dec. 6 when a vital 560 million euro ($664 million) cash call ends. Genoa-based Carige must comply by the end of the year with Europe

  2. Launches - Ex-BlueCrest team to open over $200m hedge fund, Greg Coffey, a hedge fund star who retired at 41, is eyeing a comeback, Brevan Howard plans Greek funds as bond rally signals revival[more]

    Ex-BlueCrest team to open over $200m hedge fund From Bloomberg.com: A team of traders who left BlueCrest Capital Management earlier this year raised more than $200 million for their own hedge fund focused on Asian stocks, according to a person familiar with the matter. Ovata Capital Manag

  3. North America - Miami could attract hedge funds if SALT deductions axed[more]

    From Law360.com: For years, inertia has been Nitin Motwani's greatest foe in his attempts to lure hedge fund owners in the northeast to Miami, which he has pitched as a tropical low-tax paradise. But with the Republican tax bill proposing to eliminate deductions for state and local taxes, he's sensi

  4. Northleaf Capital Partners closes debut private credit fund on $670M[more]

    Bailey McCann, Opalesque New York: Northleaf Capital Partners has closed its debut private credit fund - Northleaf Private Credit I - on $670 million. The vehicle will invest in private credit transactions in Europe and North America, with a primary focus on lending to private equity-backed compa

  5. Opalesque Exclusive: Credit Suisse Asset Management's NEXT Investors leads $6M Series A round for LUX Technology and Services[more]

    Bailey McCann, Opalesque New York: Credit Suisse Asset Management's NEXT Investors has led a $6 million Series A funding round for LUX Technology and Services, a business and technology solutions provider for the alternative assets industry. The investment will be used to fuel growth of Trans