 | Alexandros Kyparissis Analyst Hedge Funds Tel.: +44 7843 144007 Email: alexandros.kyparissis@stonemountain-capital.com |
STONE MOUNTAIN CAPITAL RESEARCH PERSPECTIVE VOL. 13
Investing in hedge fund industry is dissimilar to investing in traditional long only asset classes, where there is publicly available information on them and the investment access is relatively easy to the general public. Hedge funds are available for high net worth individuals and institutional investors (accredited investors in the US and professional investors in the UK), who have the ability to understand the inherent risks within their asset allocation strategies. Hedge funds were vastly considered as a tool for diversification during the previous decades, but with the bullish sentiment ruling the equity market and the low interest rates, their popularity is increasing. Hedge funds and investors are both relying on third-party marketers or even online databases to establish a connection between them and build a profitable relationship. The first and most important step towards the building of a hopefully long-term and successful relationship is the due diligence process. Effective due diligence constitutes a source of value added to investors’ portfolio who have to decide between a pool of funds, making their analysis of disclosed information crucial. Apart from performance reasons, due diligence’s importance emerges when it comes to risk mitigation, especially in eliminating operational risks which are the impetus for a lot of hedge fund failures.
Investing in hedge fund industry is dissimilar to investing in traditional long only asset classes, where there is publicly available information on them and the investment access is relatively easy to the general public. Hedge funds are available for high net worth individuals and institutional investors (accredited investors in the US and professional investors in the UK), who have the ability to understand the inherent risks within their asset allocation strategies. Hedge funds were vastly considered as a tool for diversification during the previous decades, but with the bullish sentiment ruling the equity market and the low interest rates, their popularity is increasing. Hedge funds and investors are both relying on third-party marketers or even online databases to establish a connection between them and build a profitable relationship. The first and most important step towards the building of a hopefully long-term and successful relationship is the due diligence process. Effective due diligence constitutes a source of value added to investors’ portfolio who have to decide between a pool of funds, making their analysis of disclosed information crucial. Apart from performance reasons, due diligence’s importance emerges when it comes to risk mitigation, especially in eliminating operational risks which are the impetus for a lot of hedge fund failures.
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