Sun, Jul 5, 2020
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers July 2019

PERSPECTIVES: Major discrepancies in hedge fund performance reporting

 

Major discrepancies in hedge fund performance reporting

The Chartered Financial Analyst Institute (CFA), one of the most important organizations in the investment industry, is expected to announce performance presentation standards for the hedge fund industry sometime later this year. Currently, they are formulating their recommendations and we applaud their efforts.

Ideally, these standards should benefit hedge fund managers by leveling the playing field on which they compete, as well as investors, by providing consistent information that will enhance their investment decision-making process. It is extremely important that the CFA Institute achieves both objectives in order to have broad adoption across the industry. Now is the time for the hedge fund industry to speak up.

Agecroft Partners feels compelled to share our updated views on what we expressed earlier this year in an educational video hosted at the CFA Institute.

Today, there is no consistency across the hedge fund industry in how net performance is calculated and presented. There is some consistency in performance and risk disclosures, but they provide very little clarity. Most disclosures offer worst-case scenarios as hedge fund law firms seek to limit their client's liability. This does help keep less sophisticated investors away

Unfortunately, this type of disclosure provides limited information to be used by sophisticated investors to measure risk-adjusted performance across managers

The most important issue that needs to be addressed is standardizing how to calculate and present a hedge fund's net performance. One might suggest simply subtracting all fees and expenses from gross returns. Unfortunately, most things are not as simple as they first appear. Here are four scenarios that illustrate the inconsistent ways various fund managers calculate performance:

1. A hedge fund is launched with non-fee-paying partner capital. After two years of managing int......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. New Launches: GP Bullhound raises $141m for its fifth tech fund, LBC Credit Partners V aims to raise $1bn, B Capital shores up $820m in second fund, BayernKapital closes second Bavarian Growth Fund, PGIM Investments launches global corporate ESG bond fund, MSIM launches Paris Agreement-aligned global balanced sustainable fund, Unigestion announces closes for Secondary V and Direct II, Waterton plans $1.25bn fundraise for latest US apartment fund[more]

    GP Bullhound raises $141m for its fifth tech fund From PE News: Technology-focused investment firm GP Bullhound has held the first close of its latest fund with €125m ($141m) of capital commitments. GP Bullhound Fund V is a pan-European venture capital fund targeting primarily l

  2. SWF: UK's Future Fund expansion 'fails to hit the mark', claim business leaders[more]

    From Telegraph: Britain's start-up rescue fund, which has been extended to include UK startups that have moved the headquarters overseas, still "fails to hit the mark" for many early-stage companies, business leaders have warned. The Future Fund, launched in May, provides Government funding of

  3. PE/VC: Disruption from COVID-19 hits ASEAN private equity hard, VCs see much to like in Democrats' $1.5tn Moving Forward Act, US PE firms play the long game as deal-making comes back into focus[more]

    Disruption from COVID-19 hits ASEAN private equity hard Opalesque Industry Update - After a strong 2019, the ASEAN private equity industry has been shaken by the outbreak of the COVID-19 pandemic, reports Preqin. As of September 2019, ASEAN-focused private equity and venture capital asset

  4. Coronavirus crisis: PE industry mulls more realism and longer holding periods[more]

    Laxman Pai, Opalesque Asia: More realism, longer holding periods and an advantage for investors with a long-term focus - these are the main changes that investment managers in the German private equity market expect as a result of the coronavirus crisis. The PE transaction activity is not exp

  5. Multi-strategy hedge funds post double-digit gains, Tiger Global, Coatue score double-digit fund gains in 2020, Lone Pine soars after losses earlier this year, Can Pershing Square's standout year continue?[more]

    Multi-strategy hedge funds post double-digit gains From FT: Large multi-strategy hedge funds have posted double-digit gains for the first half of the year, reversing losses from March, as markets defied the economic downturn brought on by the coronavirus pandemic. Citadel Advisors