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July 21, 2006
Front-Running Taints Hedge Fund Industry
Voices are whispering and talking out aloud about the rampant practice of front-running in the hedge fund industry. Hedge fund managers are looking to make profits by front-running their unit/investment trusts with their hedge funds, that is, they buy a particular stock for their hedge funds and then follow up this purchase with a similar one for their unit/investment trusts. They thus gain by any rise in the share price because of the first purchase.
In a bid to combat this practice, most hedge funds are monitoring the activities of their managers while others are making it worth their while to refrain from such practices. No wonder hedge fund managers take home hefty sum as performance fees!
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