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Most IFAs \'not capable\' of advising on hedge funds

Date: Thursday, February 26, 2009
Author: Emma Ann Hughes, FTadviser.com

A lot of the industry is not equipped to advise on hedge funds, according to Laven Partners Asset Management.

Jérôme de Lavenère Lussan, director of Laven Partners Asset Management Ltd, which offers multi strategy fund of hedge funds, said the investment vehicles needed closer scrutiny than many IFAs were capable of.

Laven Funds Multi Strategy SPC fund returned 3.98 per cent between 1 January and 31 December last year and was invested in hedge funds focused on returns with low correlation to bonds and equities, alpha generation and low volatility.

Mr de Lavenère Lussan said the fund showed the importance of intense scrutiny of hedge fund managers.

Mr de Lavenère Lussan said: "The fund exemplifies the importance of good due diligence, which given recent events is very important when using a fund of funds approach. All managers undergo a strict pre-analysis stage, which acts as an initial filter for set investment guidelines.

"Beyond due diligence, hedge funds are supposed to be de-correlated. It should give a counter balance to equities but some people piled into them as if they were equities.

"It is extremely difficult for IFAs to do that level of checks on hedge funds, understanding the operations of cash management, understanding the quality of people and trading. It is possibly too much."

Mr de Lavenère Lussan's comments came after the Treasury select committee questioned the monitoring of hedge funds.

At a Treasury select committee meeting, Peter Montagnon, director of investment affairs for the ABI, said the Hedge Fund Standards Board expected clients of hedge funds to carry out due diligence on the investment vehicles.

Mr Montagnon said: "Our members felt some of the elements to do with disclosure and transparency is not where they would like it to be. I do not yet see investors being ready for the monitoring role that the HRSB expects."