Etheios believes administration must be at the forefront of hedge fund managers' concerns

12 April 2007

Mark Seaman, Principal Consultant at Etheios, the leading independent investment management consultancy, argues that administration should be a key concern for hedge fund managers following research by SEI and Infovest21 which found that infrastructure is rated as more important that performance in hedge fund manager selection.

"The recent survey by SEI and Infovest21 reinforces Etheios’ own view that administration needs to be at the forefront of hedge fund managers' concerns and reflects the concerns of various regulators who are introducing regulatory regimes for funds of hedge funds. For instance the UK's FSA has recently proposed that key considerations for a fund of hedge fund manager carrying out due diligence on prospective hedge fund investments are the level of liquidity of the underlying funds, and the methodology for their pricing.

Ideally the underlying fund should have an independent valuation. Whereas this is the default approach in Europe, few US hedge funds have independent valuation. This would potentially rule out US hedge funds from the rapidly growing European fund of hedge funds market.

Hedge funds are currently perceived as too complex and risky by most of their potential investors. If they are to lose this image, then managers need to pay much more attention to the prosaic issues of infrastructure and administration."

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