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From the Opalesque Team:
Hedge fund due diligence provider Castle Hall Alternatives has identified 327 operational hedge fund failures ("HedgeEvents"), which add up to US$15 billion losses, leaving the $80 billion Madoff fraud aside. The firm has also identified the seven most common reasons for these failures. Cautious optimism should still be the guiding force for investors and hedge fund managers going forward.
In spite a 2.5% growth in hedge fund assets in July, thus contributing to a 9.9% growth from January to July this year according to Credit Suisse/Tremont Hedge Fund Index, the industry has yet to recover fully from the crisis of confidence aside from the redeemed undisclosed amounts last year.
Castle Hall Alternatives has published a paper “From Manhattan to Madoff: The Causes and Lessons of Hedge Fund Operational Failure”, summarizing findings from Castle Hall’s "HedgeEvent" database, which painstakingly lists 327 cases of hedge fund operational failures through June 30, 2009. Entries to HedgeEvent only include cases involving specific operational issues; hedge fund failures related primarily to failures of investment management or risk control, such as Long Term Capital Management, Amaranth and Sowood, are excluded.
Operational due diligence mandatory must include performance evaluation
"Investors must realize that effective operational due diligence is now mandatory, not optional. It is a crucial fac...................... To view our full article Click here
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