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Alternative Market Briefing

Other Voices: Missing the mark: CFA hedge fund performance standards

Wednesday, December 11, 2019

By Donald A. Steinbrugge, CFA - CEO, Agecroft Partners: The CFA Institute has released and circulated the final version of its guidelines to improve performance standards in the hedge fund industry. They will go into effect on January 1, 2020. We strongly support the effort to create and implement performance standards in the industry and believe that the CFA Institute is the right organization to lead this charge. As we have seen in the long only investment industry, GIPS performance standards are well thought out and have been broadly accepted. The adoption of these standards has greatly improved investors' ability to evaluate the relative attractiveness of managers. The standards also benefit investment managers by leveling the playing field to compete.

Unfortunately, we believe that these new performance standards for the hedge fund industry have missed the mark by failing to address some of the most important issues regarding hedge fund performance reporting. As such, we expect there to be minor acceptance of the new standards. We have had conference calls with the executive directors of the three main alternative investment associations and it appears that none of them will be publically supporting the new standards.

Investors will ultimately decide on the acceptance and implementation of these performance standards. Unless the guidelines are viewed as value added by investors, fund managers will not be pressured to align their reporting with the ne......................

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