Funds Hub
Money managers under the microscope
Brighter times ahead?
Funds of hedge funds have had a tough time recently.
Losses of 21.37 percent last year helped persuade clients to withdraw a net $50 bln in the fourth quarter and a further $85 billion in the first quarter of this year, according to HFR.
Funds of funds weren’t helped either by the speed with which private clients — who often hold these portfolios rather than the underlying fund – pulled out of the asset class.
But perhaps the hammer blow was Madoff — ironically not a hedge fund but nevertheless not spotted by some of the big funds of hedge fund firms, including RMF and UBP.
However, according to S&P Fund Services’ Randal Goldsmith, funds of hedge funds are once again seeing net client inflows, helped by this year’s pick-up in performance.
A change of Mood
Rating agency Moody’s has updated its hedge fund ratings process in the wake of the Madoff fraud and the collapse of Lehman Brothers.
The firm, which rates hedge funds on their operational risks, is putting more emphasis on certain aspects which it thinks could be key to investors.
A walk in the park
Hedge fund industry group AIMA today gave a relatively warm welcome to IOSCO’s regulatory plans.
After draft laws from the European Commission, which have been attacked by almost the entire UK hedge fund industry, IOSCO‘s proposals — including registration of managers, disclosure of systemically-important information to regulators, registration and supervision of prime brokers — must seem like a walk in the park.
Free from fraud? Get the certificate
Hedge funds wishing to demonstrate their honesty to a sceptical world can now pay for a risk assessment to show they have a low risk of fraud.
For $15,000-$20,000 Protean Fraud Risk Appraisal will use its database of every such financial crime since 1997 to see if a fund shows any suspicious characteristics.
Strong Man no more
A year ago in its final results Man Group – the world’s biggest listed hedge fund firm — was able to report assets under management of $78.5 billion and a 60 percent rise in profits.
How times have changed.
The firm’s shares took a pounding this morning, although have since made up some ground, after the firm revealed assets are now down to $44 billion, while profits almost halved.
Fraud – a booming business
Fraud is booming as financial pressures rise during the recession, according to PricewaterhouseCoopers, which last night hosted a meeting of its ‘Fraud Academy’, which aims to help companies share tips on spotting those up to no good.
“I think fraud is booming in the current downturn,” said Andrew Gordon, a partner in the forensic accounting practice.
Relocation, relocation
It would appear that where to live is the hot topic for hedge fund managers at the moment.
Star manager Crispin Odey of Odey Asset Management is “seriously considering leaving” the UK over higher taxes, the Sunday Times reported, while Krom River moved to Zug from London for lower tax and a better lifestyle, the Financial Times reported last year.
Through a glass darkly
The fund of hedge funds concept took a serious knock last year with Bernard Madoff’s $65 billion fraud, leading high net worth investors to pull out money over concerns that the due diligence hadn’t been quite as diligent as one would hope.
Even managers who weren’t exposed to Madoff had to calm client fears. This has prompted the bigger, more institutional groups to seek ways of gaining more control over assets that the underlying managers are running.
Madoff with the cash
With such huge amounts of money involved and after so much media scrutiny, it was surely only a matter of time.
According to the New York Times, a film on Madoff’s life and times is already in the works.
It just gets worse for funds of hedge funds
Funds of hedge funds are taking a greater share of the pain in the industry’s downturn.
Even as overall outflows from hedge funds slow, redemptions from fund of hedge funds are accelerating.
