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August 29, 2006
Selecting a Hedge Fund Manager
Selecting a hedge fund manager is not an easy task, as it requires careful planning and screening. It may be easy to compare their performance against a "benchmark". However, the variation between funds within an index and the index itself vary enormously. Process transparency is as much important as risk transparency. Institutional investors need to be able to satisfy themselves and their ultimate beneficiaries that their investment decisions meet the practical standard.
Read my previous post titled "Hedge Fund Activism Pushes the Firms Up", which is an interesting one.
Hedge fund managers must have a clear understanding of what the hedge fund manager can and cannot do. They should know that there is a rigorous process within the fund for measuring and evaluating both risk and reward. Select a hedge fund manager who understands what the manager's strategy is and what the responsibilities of a hedge fund manager are.
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