Hedge fund investors trying something new: Due diligence |
Date: Tuesday, March 24, 2009
Author: Bloggingbuyouts.com
When looking at hedge funds, an investor will check out a variety of
risk measures. But over the years, there was something that was often
overlooked: fraud.
However, as the credit markets seized up, we
discovered that there were some shady hedge fund operators. Of course,
the biggest example was Bernard Madoff, whose Ponzi scheme may have
reached as high as $65 billion.
As should be no surprise, investors are now conducting investigations and background searches on hedge funds. Good idea, huh? Unfortunately, it's too late for many investors.
Interestingly enough, conducting an investigation is relatively inexpensive – especially when you look at the large fees in the hedge fund world.
Oh, and investigations are getting easy. For example, when I consider making a private investment, I'll do a simple Google (NASDAQ: GOOG) search. It's amazing what things you can find from this.
And, if you want to go further, there are some useful premium services like LexisNexis.
In light of all this, the question remains: why didn't investors do this stuff before -- considering the billions and billions at stake?
Tom Taulli is the author of various books, including The Complete M&A Handbook
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