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Komfie Manalo, Opalesque Asia: Style drift, poor communications and credibility fatigue are the biggest red flags for hedge funds investors, said participants of the latest 2016 Opalesque Investor Roundtable, sponsored by Arthur Bell.
Larry Morgenthal, Managing Member at Soundlink Partners, cited style drift and poor communications as major red flags, which he said if unchecked, could result to termination of mandates. "One of the major problems which will trigger red flags and potential termination is the practice of strategy or style drift. If there is a disconnect between the manager’s stated mandate; what they told us they are doing on a day to day basis and what they are actually trading, that can definitely lead to terminations," he said.
He added that style drift itself is also a huge red flag from a due diligence standpoint, and it is also personally frustrating as an allocator if the manager was dishonest about the product that they sell.
Poor communication is another red flag, particularly around performance and transparency, Morgenthal said. He underscored the importance of communication in building a true partnership. Sometimes a small manager can perform and communicate well, and can act as an ideal partner for Soundlink, he said. However, once they bec...................... To view our full article Click here
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