Hedge funds need to communicate with investors on an unambiguous basis

Date: Friday, February 20, 2009
Author: ICFA.com

Calls for hedge funds to be less opaque was a common request among investors who participated in a survey of institutional investors, including pension funds, banks, endowments and insurance companies across the world.

Over 40% of investors raised opacity as a fundamental issue that needs to be improved, according to research carried out by the data and analysis provider, Prequin.

The investors, who had assets under management ranging from $100m to $35bn, said they wanted to know what managers are doing on a more frequent basis and to have a better understanding of how their returns are being generated.

In addition to the dissatisfaction shown over the level of information they receive over strategy, over a third of investors said they were not completely satisfied with the quality of information on liquidity and fund reporting generally.

The survey's key findings revealed that while investors on the whole remain committed to investing in hedge funds, they are re-evaluating their investment criteria and objectives.

Although over 92% of investors we surveyed are continuing to invest in hedge funds, calls for increased transparency, lower fees and liquidity are key concerns amongst investors.

In the future, institutional investors will be scrutinising funds more closely. In particular investors will be looking at the investment processes fund managers undertake and will only invest in funds that employ independent administrators and custodians.