Tue, Sep 26, 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. iCapital Network enters deal to acquire innovative U.S. private equity access fund platform from Deutsche Bank[more]

    Komfie Manalo, Opalesque Asia: Financial technology platform iCapital Network has entered into a definitive purchase agreement to acquire the US Private Equi

  2. Neuberger Berman closes $1.1bn Credit Opportunities Fund[more]

    Neuberger Berman, a private, independent, employee-owned investment manager, announced that NB Private Equity Credit Opportunities Fund LP closed on $1.1 billion of limited partner commitments. The Fund seeks to invest in the secured and unsecured debt of private equity-backed companies, primarily i

  3. Capital Dynamics launches mid-market private credit business[more]

    Capital Dynamics, a global private asset manager, has launched a dedicated Private Credit Asset Management business. Experienced industry executives Jens Ernberg and Thomas Hall have joined Capital Dynamics to co-lead the company's new private credit initiative. They are based in Capital Dynamics' N

  4. Artificial intelligence may replace 40% of all jobs: Bridgewater founder Ray Dalio[more]

    From Foxbusiness.com: Bridgewater Associates founder Ray Dalio said Friday that almost half of the jobs in the next two decades will be replaced by artificial intelligence. "By in large, the world is going to largely consist of people who can take language and put it into code, which then allo

  5. Opalesque Exclusive: US investment firms must have tailored cybersecurity policies and procedures in place[more]

    Benedicte Gravrand, Opalesque Geneva: Cyber attacks are on the increase. One of the last victims was Equifax, a US credit scoring agency. As a result of its insufficient cybersecurity program, the agency was slapped with state and federal investigations, private lawsuits and a summons for chief e