Due diligence – hopefully beyond what has already occurred
New ideas have had no capital and people unwilling to take riskConclusion: People know the old stuff does not work and people are open to change like never before
Transparency and reporting demands – from investors and regulatorsMany hedge fund managers lack the basics: - Error policies - Insurance coverage - Trade tickets - Confirmation checking
Madoff and others proved we cannot rely on regulators – or on reputation.How many managers know the overlap in sub-custodians across their multiple custodians or prime brokers?
This is not an overwhelming endorsement
Examples of transparency that are bad:If you give information to one investor, you need to offer it to all to ensure a level playing fieldProviding transparency on trading activity before executing trades is not the same as providing it afterwardRevealing confidential client information to the wrong partiesPush v. pull
Prospectus – provides visibility but not much clarity
I have more questions than answers here. But a few thoughts:US HFs will almost assuredly be asked to register with the SECTime to prepare – possibly very littleOnce plans are announced, resources will be in short supply
This goes back to transparency – and self-regulatory initiatives
Perhaps most will happen on the hedge fund side, but traditional managers are not immune – especially as they enter the alternative arenaTimeliness issues especially with sub-advisory portfolios and fund-of-fund clients – you are only as up-to-date as your slowest managerShould there be a clearinghouse for HF subscription / redemption activity?
One outsourcing provider has told us that demand has never been higher.Shift in affirmation model for hedge fund managersContinued interest in outsourcingFund accounting / fund administrationInvestment accounting / operationsDue diligenceComponent outsourcing
Traditional investment management staff generally are more knowledgeable and cost less – resulting in lowered costs for many hedge fund managers