Sat, Apr 18, 2015
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

  • 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. Tiger Global falls 2.9% in March, down 5.3% in Q1[more]

      From Reuters.com: Investment firm Tiger Global Management, one of the hedge fund industry's most closely watched players, told clients that its hedge fund lost 5.3 percent during the first quarter, an investor said on Wednesday. Much of the decline came in March when the fund lost 2.9 percent,

    2. It’s not just hedge funds—IMF study finds stability risks from ‘vanilla’ funds[more]

      From MarketWatch.com: Leveraged hedge funds and banklike money-market funds are the parts of the asset-management industry most associated with risks to financial stability. But a report from the International Monetary Fund suggests that “plain-vanilla” mutual funds and exchange-traded funds also ca

    3. Hedge funds gain 2.4% in Q1 driven by currency and commodity markets[more]

      Komfie Manalo, Opalesque Asia: Hedge funds posted positive results last March to conclude a strong first quarter, with performance driven by strong macro trends in currency and commodity markets, complemented by broad-based gains and positioning in event driven, equity hedge and fixed income-b

    4. Hedge funds looking to continue their rally in Q2[more]

      Komfie Manalo, Opalesque Asia: Hedge funds finished the first quarter on a strong note and are looking to continue the rally in the second quarter, said Lyxor Asset Management in its Weekly Brief. The Lyxor Hedge Fund Index is up 0.4% over the week

    5. Hedge funds down -0.17% in March (+1.23%YTD)[more]

      Bailey McCann, Opalesque New York: The hedge fund industry produced an aggregate return of –0.17% in March to end Q1 2015 up 1.23%, compared to the S&P 500 which increased 0.96%, according to the latest data from eVestment. Hedge fund performance returns were mixed in March amid increased equity

     

    banner