Funds of hedge funds gang up to tackle managers

Date: Thursday, January 14, 2010
Author: Joel Dimmock and Karen Foster, Reuters

The fund of hedge funds arm of Hermes, Britain's largest pension scheme manager, has rallied peers with more than $15 billion in assets to get agreement on how to better handle the managers running their money.

In one of the first such meetings of its kind, Hermes BPK Partners gathered the working group together at its London offices on Tuesday to kick-start a project it hopes will improve the disclosures made by hedge funds.

"The group will be discussing many issues facing the industry, including those important to Hermes BPK Partners, such as 'smarter' transparency," said Matteo Perruccio, chief executive and founding partner of Hermes BPK.

"Instead of focusing on the quantity of information we want to focus on getting information that is truly useful for us and the end investor."

Hermes BPK is a partnership between its directors and Hermes Fund Managers, the asset management group wholly owned by the BT (BT.L) pension scheme. Hermes Fund Managers owns 61.5 percent and the partners own 38.5 percent.

Hedge funds, often criticized for revealing little of how they invest, are under increased pressure from regulators and investors to disclose more about their positions, although some executives say more relevant data, rather than just more data, is key.

Meetings between hedge fund investors are rare as, unlike in listed companies, investor registers are not widely available.

Some critics have said some hedge fund managers have taken advantage of the fragmented nature of the investor base to offer different investors different terms.

"It's essentially a small group of peers with shared experiences talking about how they interact with underlying managers and exchanging information," said Hermes CEO Perruccio.

"One thing funds of hedge funds can improve is actively managing their relationship with underlying managers to improve alignment."

He declined to give further details of the meeting or to say whether or not the group would push hedge funds to change their behavior.