4 facts about hedge funds

Date: Thursday, October 18, 2012
Author: Richard Wilson, advisor.ca

Understanding the hedge fund industry requires knowing what is going on now and also identifying current trends affecting how hedge funds operate, invest, form, and trade.

Read: Dispelling hedge fund myths

Here are four hedge fund industry trends:

1. Recent poor absolute hedge fund performance and fraud has led to increasing pressure from investors for additional transparency and levels of governance.
2. The collapse of Lehman Brothers left some hedge funds in London without access to their assets, causing poor performance and in some cases fund failures. Since this event, hedge funds with over $30 million in assets have been investigating and implementing multi-prime brokerage models, rather than invite risk by working with one single prime broker.
3. The use of outside capital-raising resources, investor databases, and third-party marketing firms is on the rise. The capital-raising environment is more competitive, and hedge fund managers are forced to evolve their investor relationship cultivation systems, capital introduction resources, and investor contacts in order to compete.
4. Investors increasingly want to work with more institutional hedge fund managers. This typically means hedge funds with over $100 million to $250 million in assets under management. More specifically, it refers to the types of operational processes, technology, risk management, trading, and governance features that tend to be in place with funds that have $1 billion in assets under management.

Read: Hedge funds as “guardian angels”

Excerpted from: The Hedge Fund Book, A Training Manual for Professionals and Capital Raising Executives, by Richard C. Wilson, © 2010 by John Wiley & Sons, Inc.

This article was originally published on capitalmagazine.ca.