Hedge fund investors demand better deals

Hedge fund investors are beginning to assert their rights and demand better deals, following a wave of fund restructuring this year, commented Mark Brady, partner at international law firm Eversheds. Investors in failing funds rarely challenge restructuring proposals, however there are growing signs of demands as three hedge fund managers have faced rebellious investors in the last two months.

“Most hedge fund investors have not seen anything like the conditions that are present at the moment. In the more benign conditions that existed before the credit squeeze investors in underperforming funds tended to take out their money and move on. Now, faced with big losses some of them are duty bound to take action.” Brady said.

He went on, “Funds of funds and pension funds have the same duties to their constituents as any other investment vehicles and they are increasingly aware that the corporate governance arrangements of some hedge funds are relatively weak and therefore liable to attack. All hedge funds should be stress testing their corporate governance arrangements now and investors should be aware of the need for detailed legal due diligence.”