Hedge fund attempts to provide a “one-stop-shop” for investors interested in hedge funds and private equities could result in problems, say some industry attorneys.
Convergence and creating hybrid funds of the two could be challenging as managers will have to keep more complex records for funds and their side pockets and price both liquid and illiquid investments.
Michael Tannenbaum and Ricardo Davidovich, attorneys of Tannenbaum, Helpern, Syracuse and Hirschtritt, say it is easier to go from private equity into hedge funds than it is to do the reverse.
They also say that while the convergence may cause accounting headaches, they do offer benefits.
Hybrid funds offer managers the opportunity to look beyond traditional investments, aiding in capturing alpha bringing in absolute returns.