Author: Christopher L. Wallace, CPA | Partner, Financial Services Industry Team Leader
While investor and regulator demand for transparency from alternative investment firms is not a new concept, at least one survey reports that the response from some firms has not satisfied potential clients—and it may be costing them money. An astonishing 89% of investors polled by Intralinks and Opalesque have declined to put money with at least one hedge fund due to transparency concerns. For private-equity and real-estate funds, the number is 71%. Intralinks and Opalesque polled more than 100 institutional investors, family offices and ultra high net worth individuals.
According to the survey, investors do believe that hedge funds and private equity firms are getting better on transparency. Two-thirds have noted improvements among hedge funds, and 45% among private equity fund managers. But 47% of hedge-fund investors say that managers still are not offering enough information, along with 52% of private equity fund investors.
According to the article “Hedge Fund Investors Rejecting Firms Over Transparency” published by FINalternatives, investors are also pushing for data with more frequency than in the past, when quarterly reporting was the norm. Now, 25% of hedge fund investors want reports on a daily or weekly basis, and half of private equity fund investors ask for monthly updates. These investors are also looking for more than simple calculations of returns and performance. Hedge-fund investors say that exposure and leverage information is almost as important; as 96% of investors that took part in the survey responded that this information is either “very important” or “important”.
“The old saying was that no one asks questions when you’re up 20%,” Intralinks alternative investments director Andre Boreas said. “That might very well be changing—and you can thank the financial crisis of 2007-2009, Bernie Madoff, Lehman and the challenges fund managers found themselves in during this time period.”
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