Tue, Nov 21, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers January 2012

Focus
Part 1 - Ghost-busting frauds of the past: a challenge for new managers
Part 2 - Background: The regulator is watching you

Part 1 - Ghost-busting frauds of the past: a challenge for new managers

"Hedge funds are less encumbered by government regulation, less transparent to investors, play more complex games, take bigger risks, and capture the public imagination in a way that their lesser counterparts have difficulty approaching. These unique features have resulted in an increasing scale of losses due to fraud, with no corresponding increases in safeguards available for investors," says Bruce Johnson in his book, The Hedge Fund Fraud Casebook (Wiley, 2010).

This would mean that emerging managers would be grappling with the "dark side of hedge funds' secretive world."

This is not really the case anymore, however.

Now investors, regulators and investigators are more vigilant than ever through more focused due diligence, required registrations and check-ups; a high level of transparency from managers is the new black; and new regulations are being implemented all around to better harness the wild spirits and the bad apples (such as Dodd-Frank in the U.S. and the AIFMD in the EU). So the risk of being victim of a hedge fund fraudster is lessening - a little bit.

What does it mean for newcomers?

It is already hard for new hedge funds to raise new capital and to meet new demands from investors and regulators.

But are frauds of the past haunting their struggling beginnings?

According to most of the experts interviewed by Opalesque, the answer is; not in a bad way. Frauds of the past can be ghostbusted with more thorough DD (due diligence), better operations and reputable independent service providers.

When asked, to what extent the amount of financial frauds in the U.S. is deterring investors from investing in emerging managers (particularly hedge fund managers), they replied; not as much as one would think.

The emerging hedge fund manager......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

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. Middle East - Saudi-Iran war would create this domino effect of global disaster, Saudi billionaires said to move funds from region to escape asset freeze[more]

    Saudi-Iran war would create this domino effect of global disaster From CNBC.com: Events appear to be spinning out of control in the Middle East, and the threat a Saudi-Iranian war is looking increasingly credible. Make no mistake, an out and out conflict between the two nations would be

  2. Paradise Papers - Robert Mercer's effort to avoid taxes appears in Paradise Papers, Tycoon made $41m from 'people's fund', Oxford and Cambridge 'investing millions of pounds offshore', Paradise Papers reveal[more]

    Robert Mercer's effort to avoid taxes appears in Paradise Papers From Therealnews.com: The Guardian has reported that conservative billionaire and Trump backer Robert Mercer "appears as a director of eight Bermuda companies in the Paradise Papers," the trove of documents reviewed by the

  3. Wall Street hedge fund veteran hits highs with copycat tactics[more]

    From FNLondon.com: A Wall Street veteran who has made big returns for wealthy clients by piggybacking on the strategies of well-known hedge funds is taking his novel approach to stock-picking to institutional clients. Dixon Boardman, chief executive of $2.5bn fund of hedge funds Optima Fund Ma

  4. Launches - Eaton Vance, Oaktree to launch diversified credit NextShares fund, FIM launches Nordic AI-powered fund[more]

    Eaton Vance, Oaktree to launch diversified credit NextShares fund Eaton Vance Management, a subsidiary of Eaton Vance Corp., announced the expected mid-November launch of Eaton Vance Oaktree Diversified Credit NextShares, a new Eaton Vance-sponsored exchange-traded managed fund. Eaton Va

  5. Outlook - Gundlach's stock market warning comes true[more]

    From Bloomberg.com: Jeffrey Gundlach has been warning something's got to give. Based on the past two days, looks like we have our answer. Stocks fell around the world a second day and high-yield bonds headed for a fourth straight loss, resuming a historic correlation that the hedge fund manager on W