A consultant for Etheios, an independent investment management consultancy, argued that administration should be a key concern for hedge fund managers following research by SEI and Infovest21, which found infrastructure is rated as more important than performance in hedge fund manager selection.
Mark Seaman, principal consultant at Etheios, said his firm backed the SEI and Infovest21 findings.
“The recent survey by SEI and Infovest21 reinforces Etheios’ own view that administration needs to be at the forefront of hedge fund managers’ concerns and reflects the concerns of various regulators who are introducing regulatory regimes for funds of hedge funds,” Seaman said. “For instance, the UK’s FSA has recently proposed that key considerations for a fund of hedge fund manager carrying out due diligence on prospective hedge fund investments are the level of liquidity of the underlying funds and the methodology for their pricing. Ideally, the underlying fund should have an independent valuation. Whereas this is the default approach in Europe, few US hedge funds have independent valuation. This would potentially rule out US hedge funds from the rapidly growing European fund of hedge funds market. Hedge funds are currently perceived as too complex and risky by most of their potential investors. If they are to lose this image, then managers need to pay much more attention to the prosaic issues of infrastructure and administration.”