Edhec has launched an international consultation process for the implementation of a new framework for fund-of-funds reporting, the result of which will be released 17 February.
Edhec launched the consultation process due to the development of alternative investments in the absence of a genuine consideration of the specific characteristics of the risks and returns of hedge funds with regard to the provision of information to investors. This inadequacy clearly came to light in a study published by Edhec in 2003 which showed that a very large majority of European hedge fund managers were satisfied with a reporting method designed for investment in traditional asset classes. This method proposes a mean variance structure that is totally inappropriate for the risk and return profiles of alternative investment and does not inform investors of extreme risk and risk factors affecting the different returns of the hedge fund strategies in which the funds of funds are invested.
The consultation process was based on a series of recommendations proposed by Edhec with regard to the academic state-of-the-art on risk measurement in the alternative universe. The findings of this consultation, which gathered the opinions of 98 institutional investors and fund managers, allow a consensus to be established on the information required for the implementation of a pertinent reporting method in the field of alternative investment.