•  
• Tweet
•  
•        Print
•  
•         Track Keywords
•  
• 

From Kirsten Bischoff, Opalesque New York:

Trust but verify. In the months since the financial crisis, this phrase has been used often when investors into hedge funds discuss their own risk management and due diligence. Post-Madoff it was not unusual at all to hear fund of hedge funds managers discussing “trust, but verify” as it applied to the even those managers they had invested in for years. Asking a manager to prove the existence of the assets they claimed to manage was once considered bad form, but almost overnight had become a necessity.

Similarly, some hedge funds have also adopted the “trust but verify” approach to some of their third party providers, a procedural advantage that can sometimes net “operational alpha.”

“We have a number of hedge fund clients who shadow their administrators and have found errors where it comes to complex investment tracking, fees, or valuations. By having systems that allow them to see information in the same manner as the fund admin, they have been able to better communicate and work with the service provider. In some cases this meant an improvement in their NAV of up to 25bps,” said Tom Zdon, VP at hedge fund provider Advent Software at the recent Opalesque Zurich Roundtable.

Shadowing hedge fund administrators was a topic first broached when hedge funds who had internally administered their own funds found investors adaman......................

To view our full article Click here