Articles By Topic
By Topic: Transparency
-
From Vol. 5 No.12 (Mar. 22, 2012)
Preqin/Global ARC Report Details Preferences of Asia-Pacific Institutional Hedge Fund Investors Regarding Manager Selection, Geography, Strategies, Fund Structures and Terms
Hedge fund managers continue to face a challenging capital raising environment. As such, many managers have extended their reach to find new sources of capital, with a particular focus on institutional investors. At the same time, Asia-Pacific institutional investors are becoming increasingly educated about the global alternative investment fund industry and have begun to dip their toes into the alternative investment waters. Yet, to procure investments from Asia-Pacific institutional investors, fund managers must understand these investors and their investment priorities. With this in mind, Preqin, an alternative investment research firm, and the Global Absolute Return Congress (Global ARC), conducted a survey of Asia-Pacific institutional investors in hedge funds to better understand these investors’ attitudes towards alternative investment funds. Preqin and Global ARC recently released a report of the study findings (Report). Overall, the Report indicated that, although weak 2011 performance was a concern among Asia-Pacific institutional investors, confidence in hedge funds remains strong. This article highlights the Report’s key findings and their implications for hedge fund managers targeting this investor class.
Read Full Article … -
From Vol. 5 No.9 (Mar. 1, 2012)
SEI and Greenwich Associates Survey Identifies Institutional Investors’ Expectations With Respect to Hedge Fund Performance, Transparency and Liquidity
On February 22, 2012, SEI Knowledge Partnership and Greenwich Associates released the second installment of a two-part report summarizing the results of their September and October 2011 survey of hedge fund investors. For a detailed analysis of Part I, see “Survey by SEI and Greenwich Associates Highlights the Importance to Hedge Fund Investors of a Clearly Articulated, Comprehensible and Credible Value Proposition,” The Hedge Fund Law Report, Vol. 5, No. 4 (Jan. 26, 2012). The second installment, entitled “The Shifting Hedge Fund Landscape, Part II of II: The New Dynamics of Hedge Fund Competitiveness” (Report), details investors’ greatest concerns when investing in hedge funds as well as their hedge fund selection criteria and expectations. This article summarizes the findings of the Report and outlines the Report’s five key recommendations for hedge fund managers.
Read Full Article … -
From Vol. 5 No.2 (Jan. 12, 2012)
Aksia’s 2012 Hedge Fund Manager Survey Reveals Managers’ 2012 Predictions Regarding Tail Risk Hedges, Portfolio Transparency, Movement of Balances Away from Counterparties and More
In November 2011, Aksia LLC (Aksia), an independent hedge fund research and advisory firm, published its 2012 Hedge Fund Manager Survey (Survey) in which it solicited predictions for 2012 from 125 hedge fund managers managing approximately $800 billion in assets and employing various investment strategies. Thirty-eight percent of the respondents employ long-short equity strategies, 26% employ event-driven strategies, 18% employ relative value strategies and 18% employ tactical trading strategies. Among other things, the respondents made predictions about market and investment strategy performance, economic growth projections and various scenarios with respect to the European financial crisis. The respondents also shared their views on policymakers’ handling of the global financial crisis as well as the impact of market correlation and new financial regulations on their investment strategies. Notably, respondents opined on hedge fund industry specific practices, such as the use of hedges for tail risk, portfolio transparency, movement of balances away from counterparties and the availability of financing in 2011. This article summarizes the Survey’s findings.
Read Full Article … -
From Vol. 4 No.42 (Nov. 23, 2011)
Recent Enforcement Action Highlights SEC’s Concern with Preferential Redemption Rights Granted to Favored Hedge Fund Investors
Hedge fund investors are demanding greater liquidity where liquidity is practicable. See “What Do Hedge Fund Investors Want in Terms of Liquidity and Transparency?,” The Hedge Fund Law Report, Vol. 4, No. 39 (Nov. 3, 2011). Some managers are addressing such demands by launching more liquid funds. See our recent interview with Dechert Partner George Mazin (question on bifurcation in post-crisis hedge fund launches along liquidity lines). Other managers are addressing such demands by launching moderately liquid hedge funds but granting certain investors preferential redemption rights, often via side letters. See “Are Side Letters Granting Preferential Transparency and Liquidity Terms to One Investor Ipso Facto Illegal?,” The Hedge Fund Law Report, Vol. 4, No. 18 (Jun. 1, 2011). The former approach passes regulatory muster. To an increasing degree, the latter approach does not. Regulators are concerned that any asymmetry in the redemption rights granted to hedge fund investors that otherwise are getting the same material terms may conflict with the manager’s uniform fiduciary duty to all fund investors. See “Delaware Chancery Court Opinion Clarifies the Scope of a Hedge Fund Manager’s Fiduciary Duty to a Seed Investor,” The Hedge Fund Law Report, Vol. 4, No. 29 (Aug. 25, 2011). Top SEC officials have expressed this concern with increasing volume of late, most recently at this week’s Practising Law Institute program on hedge funds. A recent enforcement action illustrates a factual scenario in which the SEC’s legal concern may give rise to causes of action against a hedge fund manager. Practically, this action will help hedge fund managers define the scope of accommodation that permissibly may be granted to a significant investor that demands greater liquidity than other investors. See “How Can Liquid Hedge Funds Be Structured to Accommodate Investments in Illiquid Assets?,” The Hedge Fund Law Report, Vol. 4, No. 4 (Feb. 3, 2011). Theoretically, this action is part of a growing body of regulatory statements and authority suggesting that uniform liquidity for similarly situated hedge fund investors is in the nature of an inalienable investor right. This article details the factual and legal allegations in the order and discusses the implications of the order for hedge fund liquidity, brokerage activity by hedge fund managers and principal transactions.
Read Full Article … -
From Vol. 4 No.39 (Nov. 3, 2011)
What Do Hedge Fund Investors Want in Terms of Liquidity and Transparency?
In the aftermath of recent high profile hedge fund scandals and the 2008 financial crisis, hedge fund investors have raised their expectations with respect to the degree of fund liquidity and portfolio transparency demanded from fund managers. Heightened transparency offers investors an opportunity to more closely evaluate the risks and conflicts of interest attendant to their fund investments. See “Eight Corporate Governance Steps That Hedge Fund Managers Should Consider in Response to Concerns Expressed by Institutional Investors,” The Hedge Fund Law Report, Vol. 4, No. 35 (Oct. 6, 2011). More preferential fund liquidity terms offer fund investors better opportunities to exit their investments, which can be a valuable tool particularly in times of financial market dislocation. See “How Can Hedge Fund of Funds Managers Manage a ‘Liquidity Mismatch’ Between Their Funds and Underlying Hedge Funds?,” The Hedge Fund Law Report, Vol. 2, No. 40 (Oct. 7, 2009). Fund managers must be attentive to the nuanced demands of these investors, particularly in light of the heightened competition in the challenging capital raising environment. Private fund data provider Preqin recently published two reports in which institutional investors were surveyed to ascertain their views on fund liquidity and transparency. The first study, conducted in June 2011 (Transparency Study), details changing expectations and satisfaction levels with respect to the level of transparency being offered by fund managers; the categories of transparency being requested by institutional investors; and how and how often hedge fund managers should communicate with institutional investors. The second study, conducted in September 2011 (Liquidity Study), details institutional investor preferences when it comes to fund liquidity terms; institutional investor expectations with respect to the length of lock-up and redemption periods; the trade-offs between illiquidity and other fund terms (such as fees) that investors are willing to make; and whether institutional investors are willing to invest with managers that imposed gates during or shortly after the credit crisis. A fund manager’s ability to understand and adequately address the concerns of institutional investors on these two fronts can go a long way towards helping fund managers retain existing institutional investors and towards attracting new ones. See “Certain Hedge Funds Are Using Enhanced Liquidity as a Marketing Tool,” The Hedge Fund Law Report, Vol. 2, No. 22 (Jun. 3, 2009).
Read Full Article …