Independent administrators are the future, say MFA
07 September 2012 Washington
Image: Shutterstock
A trio of firms have stressed the importance of third party administrators and custodians in the hedge fund space.
The Managed Funds Association (MFA) partnered with BNY Mellon and HedgeMark to release a new industry white paper, “risk roadmap: hedge funds and investor’s evolving approach to risk.”
The paper focuses on risk management, including survey data and analysis supporting the topic. Focusing on investors continuance in demanding more from hedge funds during the due diligence process, it highlights how hedge funds have responded to this demand through improved risk management policies.
The report also emphasises the way hedge fund risk has changed in recent years as a response to operational and counterparty risks, highlighting the growth of third party administrators and custodians in the hedge fund space.
“Prior to 2008, administrators offered limited capabilities to the manager and investors,” the report stated. “In the last few years we have seen administrators increasingly offering increased verification, independent pricing, higher quality reporting, and, in some cases, position-level risk analysis capabilities.”
MFA’s report went on to reveal how hedge funds have increased reliance on independent administrators and will continue to so in the future, further saying that “Over 50 percent of investor respondents agree that independent verification of position data is essential.”
Richard Baker, MFA’S president and CEO said in a recent statement:
“Today’s hedge funds operate in a dramatically different environment than five or ten years ago. While some changes have been driven by external factors, many have come from within, founded in the belief that fund managers and investors form a partnership based on shared goals.
“While risk is inevitable in the marketplace, fund managers have taken great strides to improve how they manage and minimise risk for their funds and investors. In doing so, managers have found that transparency and communication – as well as reliance on independent parties – are important components to help strengthen the investor, fund partnership.”
The Managed Funds Association (MFA) partnered with BNY Mellon and HedgeMark to release a new industry white paper, “risk roadmap: hedge funds and investor’s evolving approach to risk.”
The paper focuses on risk management, including survey data and analysis supporting the topic. Focusing on investors continuance in demanding more from hedge funds during the due diligence process, it highlights how hedge funds have responded to this demand through improved risk management policies.
The report also emphasises the way hedge fund risk has changed in recent years as a response to operational and counterparty risks, highlighting the growth of third party administrators and custodians in the hedge fund space.
“Prior to 2008, administrators offered limited capabilities to the manager and investors,” the report stated. “In the last few years we have seen administrators increasingly offering increased verification, independent pricing, higher quality reporting, and, in some cases, position-level risk analysis capabilities.”
MFA’s report went on to reveal how hedge funds have increased reliance on independent administrators and will continue to so in the future, further saying that “Over 50 percent of investor respondents agree that independent verification of position data is essential.”
Richard Baker, MFA’S president and CEO said in a recent statement:
“Today’s hedge funds operate in a dramatically different environment than five or ten years ago. While some changes have been driven by external factors, many have come from within, founded in the belief that fund managers and investors form a partnership based on shared goals.
“While risk is inevitable in the marketplace, fund managers have taken great strides to improve how they manage and minimise risk for their funds and investors. In doing so, managers have found that transparency and communication – as well as reliance on independent parties – are important components to help strengthen the investor, fund partnership.”
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