Thu, Oct 2, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers July 2014

SCOTSTONE COLUMN: He who pays the piper calls the tune

He who pays the piper calls the tune: Investor due diligence has tightened hedge fund operational controls Ian Hamilton

This column is authored by Ian Hamilton, who is the founder of IDS Group. IDS provides fund administration services in Africa and Europe through Malta. He is also the founder of Scotstone Investments, a company that has fund structures and services for global emerging new managers.

It is not an easy ride for many hedge funds with the new institutional investors now calling the tune.

Investors in the past have unfortunately been sloppy in their due diligence when investing in hedge funds. One has only to see what Madoff was able to get away with and also to look at the institutional names involved in feeder funds into Madoff's fund.

Private investors do not have the resources to do a full due diligence test but there are short check lists that at least reduce much of the work needed. I call my list "Terms of Engagement" and it is the following:

  • The investment manager should be a licenced entity in the jurisdiction they are operating from. Check this out with the relevant authority. Do not rely on the fund managers word and marketing material.
  • The hedge fund should also be a regulated fund; while there are unregulated funds out in the market it is best to avoid them as corporate governance can be poor.
  • Check that there is a clear segregation of assets and bank accounts of the fund from the fund manager.
  • The appointment of a third party administrator and also the regulated oversight of the administrator. Make sure that the administrator is an actual party!
  • The use of a prime broker.
  • Custodian to ensure that the ......................

    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

  • Banner

    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. Legal - Court throws out lawsuits related to Fannie Mae, Freddie Mac profits, Insider case by SEC is a step removed from Herbalife itself, SEC grants Citigroup waivers, easing hedge-fund curbs[more]

      Court throws out lawsuits related to Fannie Mae, Freddie Mac profits From WSJ.com: A group of Wall Street investors on Tuesday suffered a blow in their attempts to sue the federal government over their treatment of the shareholders of mortgage finance giants Fannie Mae and Freddie Mac af

    2. Launches - Goldman Sachs Asset Management launches GS Long Short Fund, Western & Southern launching international hedge fund, Lansdowne Partners plans energy hedge fund, RBC Global Asset Management launches new RBC Funds (Lux) - Asia Ex-Japan Fund, PVE Capital latest credit strategy to launch on the Sciens managed account platform[more]

      Goldman Sachs Asset Management launches GS Long Short Fund From Marketwatch.com: Goldman Sachs Asset Management has announced the launch of the Goldman Sachs Long Short Fund, which pursues high conviction investment ideas in global equity markets through a fundamental, bottom-up approach

    3. CalPERS’ move might alter hedge fund fees for good[more]

      Benedicte Gravrand, Opalesque Geneva: When CalPERS, the California Public Employees’ Retirement System, announced on September 15th that it was unwinding its hedge-fund portfolio, it was seen by many as is a significant blow to the sector’s appeal. The Fund is

    4. Opalesque Exclusive: Institutions eye private credit over traditional fixed income[more]

      Bailey McCann, Opalesque New York: Investing in private insurance, realty tax receivables, or investment-grade short-term accounts receivable may not spring to mind as a means of mitigating risk in a portfolio, but one firm, New York-based BroadRiver Asset Management is out to change all that. Th

    5. Short-term trading quant fund beats S&P since '09[more]

      Benedicte Gravrand, Opalesque Geneva for New Managers: A relatively new multi-strategy, market-neutral quantitative hedge fund has managed to outperform the S&P500 and the HFRX Global since 2009. New Jersey-ba