This title focuses solely on hedge fund transparency and offers a balanced perspective that appreciates both the needs of institutional investors and hedge fund managers. It presents clear insight on why hedge fund transparency is an issue, as well as offering solutions. It includes "perspectives" based on interviews with numerous eminent practitioners from both sides of the investor/hedge fund debate. Service providers including consultants, prime brokers, third party marketers, capital introducers, systems providers, lawyers and accountants, should additionally acquire an enhanced insight into the needs of both investors and hedge funds in order to tailor their services to the market needs. The press and the regulators can also achieve enhanced understanding of this complex and controversial subject. Written by the chair of the Investor Risk Committee of the IAFE Committee on Hedge Fund Transparency, this title is well placed to advise on and explain the issues for all concerned participants.
1. What is Risk?
2. Types of Risk
3. Transparency/Translucency
4. Risk Measurement
5. Risk Reporting and Visualization
6. Hedge Fund Risk Systems
SECTION II: Institutional Investors
1. Overview of institutional investing in hedge funds
2. Pension plan sponsors hedge fund investing including perspectives on transparency from the following distinguished practitioners:
- William Cook, Aegon USA Investment Management
- Mark Anson, CalPERS
- Pierre Jette, CDP Capital
- Paul Platkin, General Motors Pension Plan
- Ron Mock, Ontario Teachers Pension Plan
3. Endowments and foundations hedge fund investing including perspectives on transparency from the following distinguished practitioners:
- Jay Yoder, Smith College
- Matthew Stone, The University of Chicago
- Mark Yusko, The University of North Carolina Chapel Hill
- Director of Investment Strategies at the endowment of a large university
SECTION III: Funds of Funds
Section III covers the role of funds of funds and the unique risk issues of fund of fund investing. It also includes the perspectives of following eminent fund of funds managers on transparency by their underlying hedge funds and in turn by funds of funds to their institutional investors:
- Bruce Lipnick, Asset Alliance
- Barry Seeman, AXA
- Richard Bookbinder, Bookbinder Capital
- Jack Heidt, Heidt Capital
- John Trammell, Investor Select Advisors
- Kelsey Biggers, K2 Advisors
- Sean McGould, Lighthouse Partners
- Jean Karoubi, LongChamp Group
- Jeff Chicoine, Mesirow Alternatives
- Tom Strauss, Ramius Capital
- Pierre-Yves Moix and Stefan Scholz, RMF Investment Products
SECTION IV: Hedge Funds
1. The overview includes: an overview of hedge funds, a comparison of hedge fund chapter sources, a comparison of hedge fund indices and a historical performance of hedge funds by style. It also includes perspectives on transparency from the following distinguished practitioners:
- Andrew Pernambuco, Alexandra Investment Management
- Michael Rulle, Graham Capital Management
- Bill McCauley, III
- Lee Ainslie, Maverick Capital
- Myron Scholes, Oak Hill Capital
- Mike Linn, Omega Partners
- Andrew Weisman, Strativarious
2. Convertible Arbitrage
3. Emerging Markets
4. Equity Long/Short
5. Event-Driven; including distressed securities and merger arbitrage
6. Fixed Income
7. Global Macro
8. Managed Futures
9. Market Neutral
10. Short Biased
Chapters two through ten in this section each include:
- A description of the strategy
- A list of largest players
- A comparison of coverage of funds within strategy by hedge fund data sources
- An analysis of indices and their components
- Historical performance by return graphics, aum quartiles, source, leverage, sharpe ratio, etc.
- An identification of the key risks of the strategy
- A discussion of the applicably of VAR to the strategy
- Key due diligence questions for funds in the strategy
- Publicly disclosed problems that have impacted the strategy
SECTION V: Appendices
Appendix 1: The findings of the Investor Risk Committee (IRC) on hedge fund risk transparency.
Appendix 2: "Sound Practices for Hedge Fund Managers" released by Caxton Corporation, Kingdon Capital Management, LLC, Moore Capital Management, Inc., Soros Fund Management, LLC and Tudor Investment Corporation.
Appendix 3: "Due Diligence" by Jon Lukomnik of Capital Market Risk Advisors, Inc. (CMRA) from A Guide to Fund of Hedge Funds Management and Investment published by the Alternative Investment Management Association Limited (AIMA), October 2002. This article puts forward due diligence suggestions that expand the work of the Alternative Investment Managers Association (AIMA) to include with a risk focus.
Appendix 4: A CMRA-enhanced version of the AIMA due diligence review guidelines for hedge fund managers
Appendix 5: "Risk Standards for Institutional Investment Managers and Institutional Investors" prepared in 1996 by The Risk Standards Working Group (comprised of eleven plan sponsors) with technical assistance from CMRA
Appendix 6: A detailed comparison of proprietary buy-side risk systems
Appendix 7: Glossary
Appendix 8: Bibliography
About Leslie Rahl
Leslie Rahl is president of Capital Market Risk Advisors, Inc, a risk management consultancy firm. Prior to founding her consultancy firm in 1991, Leslie spent 19 years at Citibank, nine of which were as head of Citibank's Derivatives Group in North America. Ms Rahl was named among the "Top 50 Women in Finance" by Euromoney in 1997 and was profiled in both the fifth and 10th anniversary issues of Risk magazine. She has been published numerous times. She was a director of the International Swaps and Derivatives Association (ISDA) for 5 years and is currently a member of the Board of the International Association of Financial Engineers and the Fischer Black Memorial Foundation and a member of the Board of Advisors for the financial engineering programme at the Sloan School. Ms Rahl received her undergraduate degree in computer science from the Massachusetts Institute of Technology and her MBA from the Sloan School of Management.
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