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by Beverly Chandler, Opalesque London:

A recent investigation by the Hedge Fund Law Report finds that hedge funds are continuing to duplicate administrative functions by outsourcing administration but continuing to shadow their administrators’ activities in-house.

Before the financial crisis, the majority of hedge funds were administered by their managers in-house but now with the arrival of increased regulation, most outsource some or all of the administrative function.

This is all to the good for an industry that has endured liquidity crises and high profile frauds over recent years. The asset management world is agreed that hedge funds will attract more institutional investment if they behave more like an institutional investment class.

The opening of 2012 saw Ernst & Young’s hedge fund survey commenting on the phenomenon of shadowing. "Not entirely dissimilarly, administrators are seen as an important bulwark to the confidence of investors, but again there are doubts about their effectiveness where they might most be needed" the report said. "Shadowing abounds and, in many cases, is deemed to be a necessity, not a luxury. It is hard to predict whether, as daily liquidity funds proliferate, this will continue or die out, at least at that end of......................

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