Hedge Fund Fraud

Hedge Fund Fraud Due Diligence

I recently found an article that talks about hedge fund fraud and how it can be very difficult to detect in hedge funds because of their secrecy, but rigorous due diligence can prevent some types of fraud. This article mentions that Although audits are important, they may be occur too late. A key requirement for many investors is for the hedge fund manager to open their investments for review. This article suggests that if the hedge fund is unwilling then do not give it your investment. A hedge fund investor should make sure that a thorough operations review is conducted, including fees. This review can protect investors from shouldering costs that should be paid for through the management fee.

This article also suggests that those who have an investment adviser should ask if there adviser has an operations review system. Many investment advisers do not go beyond the initial due diligence when selecting a hedge fund. With the industry evolving, due diligence must too through an independent operational review that obtains information from not just the manager but also the prime broker's or fund's custodian. This guide includes the important data that an independent operational review should cover. Improving operational due diligence should in theory at least help investors avoid investing with a fraudulent hedge fund manager.

Resource: Fraud Article

- Richard

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