Hedge Fund Intelligence New standards in Investor Transparency | Page 12

NEW STANDARDS IN INVESTOR TRANSPARENCY

to hire independent service providers such as trustees, auditors, administrators
and custodians. As for fraudulent activities, it can be said that while it is impossible to guarantee total protection from fraud risk, the independent custody of
assets should significantly improve the protection of investors’ assets.”
Kevin Hrad, senior consultant, hedge fund research, at investment consultant
Hewitt Ennisknupp in Chicago, says that transparency is a vague term that can
mean different things to different investors.
“Some investors just want the comfort that assets
are there,” he says. “Others want a much better
understanding of how a portfolio is managed and
an insight into the thought process and philosophy
behind its asset allocation, which means testing how
well the team knows its 25th largest position rather
than just its top two.”
“Others want to aggregate positions across a portfolio for a more holistic view of their investments
and the risk factors they are exposed to, not just
with one manager but across a range of managers
who may represent things very differently,” he says.
“For us, it is all of the above,” says Hrad. “We make
Kevin Hrad, senior
it clear that we want full-level transparency. We’re
consultant, hedge fund
not going to compromise on transparency, regardresearch, at investment
less of the reputation or track record of the manager.”
consultant Hewitt
“The most extreme approach is to require that all
Ennisknupp
an investor’s funds are managed on a completely
>> Some investors just want transparent basis and conform to a framework
the comfort that assets are where there is real-time independent monitoring of
all positions,” says Holland at Liongate. “There is an
there. Others want a much expense associated with this approach, both in terms
better understanding of
of the cost of the mandate and in terms of the ophow a portfolio is managed portunity cost that can limit returns by creating very
for not being transparent >> narrow risk templates that funds have to fit into.”
While Holland says that Liongate insists on robust
12 Special Report June 2014

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