Hedge Fund Intelligence New standards in Investor Transparency | Page 14

NEW STANDARDS IN INVESTOR TRANSPARENCY
that may be very good at generating alpha in their particular strategy, but which
equally may have neither the time, resources nor expertise to deliver the reporting required by today’s more demanding investors.
PAAMCO’s Barlow has authored a report on this subject, which advises that
“as an operational due diligence team, we hold the emerging manager to the
same standards as we do the more established manager, and recommend that
other investors take a similar approach”.
On some occasions, as Barlow’s paper acknowledges, routine but important
procedures of testing a manager’s processes cannot be undertaken, simply because the new manager has not begun to trade. In those instances, due diligence
can be more time-consuming. It also means that
due diligence testing can, according to Barlow, end
up becoming “more like due diligence consulting”.
In practice, as well, being provided with the information is one thing. Being able to make effective use
of what may amount to information overload is another. “We have been aware of investors being given
very transparent reporting who were hopelessly illequipped to analyse it,” says Permal’s Fawcett. “If
you get sent a 100-page print-out from a convertible
arbitrage manager, for example, it is a detailed and
complicated document. If it’s not sent in the right
format, and if you don’t have the people who are
Christopher Fawcett,
able to understand it, it’s no good to you at all.”
senior investment officer
As Fawcett says, this gives rise to the suspicion that
some managers may simply be going through the
at Permal Investment
motions in terms of transparency. At best, he says,
Management
this will result in reams of reports being sent to
>> We have been aware
managers that are not read, let alone analysed.
of investors being given
At worst, Fawcett says that he knows of some funds
very transparent reporting of funds claiming to have been given full-level reporting from managers which don’t provide transwho were hopelessly
lying
ill-equipped to analyse it >> parency. “To be blunt, people were says. about the
transparency they were getting,” he
14 Special Report June 2014

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