Practical Operational Due Diligence on Hedge Funds
Processes, Procedures, and Case Studies
Inbunden, Engelska, 2016
Av Rajiv Jaitly
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Fri frakt för medlemmar vid köp för minst 249 kr.Tighten due diligence procedures for more successful hedge fund investment Practical Operational Due Diligence on Hedge Funds is an encyclopaedic, comprehensive reference, written from the perspective of an experienced practitioner. Accompanied by a useful archive of factual material on different hedge fund issues, including failures, fines, and closures, this book focuses on the areas due diligence professionals should address, and explains why they're important. Extensive discussion of publicised cases identifies the manager entities and actual fund vehicles involved, and provides commentary on what could have been done differently in each case, backed by actual regulatory materials, such as SEC complaints, that recreate the events that took place. Readers gain a deeper understanding of the many facets of due diligence and the many possible pitfalls, learning how standardise processes and avoid major errors and oversights.The amount of money managed by hedge funds has almost doubled from the $1 trillion under management at the time of the financial crisis. Hedge funds can be extremely risky, but can be extremely profitable — as money increasingly flows back in, due diligence on these alternative investments becomes more and more critical. This book provides complete guidance toward the due diligence process, with plentiful real-world examples. Identify the areas of due diligence and what can go wrongCreate procedures and checklists to minimise errorsLearn what publicised cases could have done differentlyGain a deeper understanding of massive failures and successesProper due diligence can be a massive undertaking, but thoroughness is essential when the price of failure is so high. Practical Operational Due Diligence on Hedge Funds provides the details professionals need to be on point every time.
Produktinformation
- Utgivningsdatum2016-02-19
- Mått178 x 252 x 41 mm
- Vikt1 261 g
- FormatInbunden
- SpråkEngelska
- SerieWiley Finance Series
- Antal sidor880
- FörlagJohn Wiley & Sons Inc
- ISBN9781119018759
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RAJIV JAITLY is the managing partner at Jaitly LLP, a risk consultancy that provides independent risk, fund governance and operational due diligence services to global alternative investment clients. He set up and managed due diligence and investment management operations for the alternative investment asset businesses of major companies such as UBS, Santander and AXA. Jaitly has also advised the Regulatory Policy team of the U.K. Pensions Regulator, was appointed an expert by the UK Office of Fair Trading for its market study into the UK defined contributions pensions market and was commissioned by the UK Financial Services Consumer Panel to write a report on Fund Costs and their implications. He has also held appointments as a non-executive director of funds.
- Preface xIiiiAcknowledgments xlviiAbout the Author xlixDisclaimer liPart I Processes and ProceduresChapter 1 What is a Hedge Fund? 31.1 The Role of a Hedge Fund in an Investment Portfolio 5Chapter 2 Defining Operational Issues 72.1 Classifying Problems and Failures 82.2 Fraud 82.3 Insolvency and Winding Up 102.4 Investment Losses Outside the Fund’s Stated Volatility Range 102.5 Operational Problems, Fund Defaults and Material Breaches of Contract 112.6 Regulatory Intervention Resulting in a Settlement, Fine or Fund Closure 122.7 What Happens When It All Goes Wrong 12Chapter 3 Structures for Investment in Alternatives 153.1 A Quick Primer on Fund Structures 153.2 Limited Companies 173.2.2 Significance of Jurisdiction 183.3 Unit Trusts 193.4 Partnerships 193.5 Managed Accounts 203.6 Master Feeder and Mini Master Structures 213.7 Umbrella Structures 223.8 Ucits 233.9 The Changing Landscape and the Implications for Investors 233.10 Regulatory Arbitrage 23Chapter 4 Is the Fund for Real? Establishing the Basics 254.1 Constitutional Documents 254.2 Fund Contracts and the Basics of Contract Reviews 284.3 Service Providers to the Fund 324.4 Manager Visits 464.5 Background Checks 494.6 Initial Questionnaires to Commence Due Diligence Work 504.7 “Generic Risks” in Documents and Contracts 53Chapter 5 Understanding Fund Operations and Controls 615.1 Investment Strategies and What They Involve 625.2 Operational Structures Required to Support an Investment Strategy 635.3 Establishing the Existence of Controls 64Chapter 6 Governance – Managing Risk Through a Non-Executive Board 656.1 Investor-Nominated Directors 666.2 Managing Risk as a Non-Executive Board 67Chapter 7 Reporting to Members and Statutory Reporting 757.1 Statutory Reporting 757.2 Financial Statements 767.3 Designing a Template for Reviewing Financial Statements 817.4 Shareholder Voting: the Automatic Proxy 837.5 Investor Reporting and Transparency 847.6 Conflicts of Interest and Transparency 85Chapter 8 The Curse of Leverage (Fund Liabilities) 878.1 Who Provides Finance 888.2 How Financing is Secured 908.3 How Collateral Creates Fund Risk 928.4 Understanding Default Clauses and Covenants 938.5 Collateral Management and the Concept of Margining 958.6 Rehypothecation 978.7 Blow-Ups Due to Leverage 99Chapter 9 Fund Assets 1039.1 Valuation Concepts 1039.2 Designing Principles for Valuations 1059.3 Valuations From an Accounting Perspective 1089.4 AIMA Recommendations 1109.5 Valuing Level 3 Investments and Illiquid Investments 1129.6 Valuation Tricks and Discrepancies Including Accounting and Dealing NAVs 1139.7 Liquidity 1159.8 Style Drift 1169.9 The Side Pocket 1179.10 Reviewing Derivative Transactions 1189.11 Betting the House and Its Contents 1199.12 Naked Shorts and Options 1209.13 Monthly Reporting and What It Means 1229.14 Hedging Currency Risk and Implications for Liquidity 1239.15 Realising Fees on a Fund and Deferrals 1249.16 The Basics on Taxation of Hedge Funds 126Chapter 10 Fraud 12910.1 Phantom Funds and Theft 12910.2 Ponzi Schemes 13010.3 Intentional Misvaluation 13110.4 Preferential Treatment 13110.5 Misrepresentation/Misreporting 13210.6 The Nick Leeson Syndrome: Rogue Traders 13410.7 Covering up Mistakes 136Chapter 11 Fees: The Essence of Hedge Funds 13711.1 High Water Marks, Hurdles and Claw Back Provisions 13811.2 What Does It Cost to Run a Fund? 14211.3 Can Investors Pose a Risk to the Survival of a Fund? 14411.4 The Gate 14511.5 Redemption Terms and Lock-Ups 14611.6 Fees on Side Pockets and Illiquids 14611.7 The Capital Base of the Fund 14711.8 Aligning Interests 14711.9 Arrivals and Departures: Fund Dilution, Rebalancing and Box Management 147Chapter 12 Regulatory Actions, Politics and Market Confidence 14912.1 Characteristics of Successful Complaints and Defences 15112.2 The Basics of an SEC Complaint 15412.3 Investigations by the UK Financial Conduct Authority 16012.4 Large Financial Services Firms vs Small Financial Services Firms 16512.5 Managing Electronic Discovery 16912.6 Aifmd 17012.7 Developments in the Asia Pacific Region 17112.8 Investor Protection Through Regulation 17112.9 Identifying Future Risks 173Chapter 13 Key Man Risk, Disaster Recovery and Business Continuity 17513.1 The House of Cards – Disaster Recovery or Business Continuity 17613.2 Whose Information Is It Anyway? 17713.3 Insurance 178Chapter 14 Negotiating Terms and Exercising Rights 18114.1 The Subscription Document 18114.2 The Necessity for Side Agreements 18214.3 The Implications of Side Agreements 18514.4 Things to Consider 18714.5 Exercising Shareholder Rights 19114.6 Taking Over the Management of the Fund 19214.7 Exiting or Redeeming From a Fund 193Chapter 15 Risk Ratings and Scoring 19515.1 Scoring: Temptations and Dangers 19615.2 Risk Mapping and SOX Controls 19715.3 A Template for Scoring a Hedge Fund 20015.4 External Rating Agencies 22115.5 Outsourcing Due Diligence by Funds of Funds and Institutions 222Chapter 16 Marketing to Investors 22916.1 What the Prospectus Does Not Say 22916.2 Does Operational Risk Really Matter? 23116.3 Marketing as a Differentiating Factor 23216.4 Career Risk Management 23316.5 Investment Selection Processes – the Deceptiveness of the Power of Veto and Overriding Controls 235Part II Case StudiesChapter 17 Case Studies Pre- 2000 23917.1 Fleschner Becker Associates 24217.2 D.E. Shaw & Co LP 24417.3 Askin Capital Management L.P. 24717.4 Guarente-Harrington Associates 25017.5 Hubshman Management Corp 25317.6 Investor Overseas Services Limited 25317.7 Long-Term Capital Management L.P. 25617.8 Niederhoffer Investments Inc/NCZ Commodities Inc 25917.9 Odey Asset Management Ltd 26017.10 Omega Advisors Inc 26117.11 Pharos Capital Management LP 26517.12 Piper Capital Management Inc 26617.13 Steadman Security Corporation 26817.14 Steinhardt Management Company Inc 27017.15 Takara Asset Management Corporation 273Chapter 18 Case Studies 2000 27518.1 Ashbury Capital Management LLC 27518.2 Laser Advisers Inc 27618.3 Manhattan Capital Management, Inc 27718.4 Maricopa International Investment Corporation 27918.5 Penta Investment Advisers Ltd 28018.6 Soros Fund Management LLC 28218.7 Tiger Management Corp 283Chapter 19 Case Studies 2001 28519.1 E Thomas Jung and E Thomas Jung Partners Ltd 28519.2 Marque Millennium Group, Inc. 28619.2.1 Reference Article 28619.2.2 Background 28619.2.3 Observations 28719.3 Heartland Advisors Inc 287Chapter 20 Case Studies 2002 28920.1 Beacon Hill Asset Management LLC 28920.2 Integral Investment Management LP 29020.3 Klesch & Co Limited 29220.4 Orca Funds Inc 29320.5 Trout Trading Management Company Ltd 294Chapter 21 Case Studies 2003 29721.1 Cptr Llc 29721.2 Canary Investment Management LLC 29921.3 Eifuku Investment Management Limited 30321.4 J.T. Investment Group Inc and New Resource Investment Group INC 30421.5 Lancer Management Group LLC and Lancer Management Group II LLC 30521.6 Lipper Holdings, LLC 30821.7 Millennium Capital Group LLC 310Chapter 22 Case Studies 2004 31322.1 Dobbins Offshore Capital LLC 31322.2 Fountainhead Asset Management LLC 31422.3 LF Global Investments LLC 31622.4 Nextra Investment Management SGR 317Chapter 23 Case Studies 2005 31923.1 Creedon Keller & Partners 31923.2 Aman Capital Management Pte LTD 32023.3 Applegate Investments 32223.4 Amerindo Investment Advisors Inc 32223.5 Lake Dow Capital, LLC 32423.6 Bailey Coates Asset Management LLP 32523.7 Bayou Management LLC 32523.8 AJR Capital Inc and Century Maxim Fund Inc. 32723.9 Durus Capital Management LLC 32823.10 Entrust Capital Management Inc 33123.11 EPG Capital Management Inc 33123.12 HMC International, LLC 33323.13 K.L. Group LLC, KL Florida LLC & KL Triangulum Management LLC 33423.14 Hunter Capital Management LP 33523.15 Linuxor Asset Management LLC 33623.16 Lyceum Capital LP 33823.17 Marin Capital Partners LLC 33923.18 Millennium Management LLC 33923.19 Norshield Asset Management (Canada) Ltd 34123.20 Philadelphia Alternative Asset Management Company LLC 34423.21 Phoenix Kapitaldienst GMBH 34523.22 Pippin Investments 34723.23 Portus Alternative Asset Management Inc 34823.24 Refco Inc. 35023.25 Springer Investment Management Inc 35123.26 Tenet Asset Management LLC 35323.27 Melhado, Flynn & Associates Inc 35423.28 Veras Investment Partners LLC 35623.29 Wood River Capital Management LLC 357Chapter 24 Case Studies 2006 35924.1 Amaranth Advisors LLC 35924.2 Archeus Capital Management LLC 37024.3 Benchmark Asset Management – UK 37224.4 Capitalworks Investment Partners, LLC 37324.5 CMG-Capital Management Group Holding Company, LLC 37424.6 Directors Financial Group Ltd 37624.7 Endeavour Funds Management Limited 37824.8 Global Crown Capital LLC and J&C Global Securities Investments LLC 37924.9 GLG Partners Inc 38124.10 International Management Associates LLC 38524.11 Brummer & Partners 38624.12 Manchester Trading LLC 38724.13 Motherrock LP 38824.14 Langley Capital LLC 38924.15 RCG Capital Advisors LLC 39124.16 Samaritan Asset Management Services Inc 39224.17 Seaforth Meridian Advisors LLC 39424.18 Plusfunds Group Inc 39624.19 Spinner Asset Management LLC 39824.20 Viper Capital Management LLC and Compass Fund Management LLC 399Chapter 25 Cases Studies 2007 40125.1 Absolute Capital Group Ltd 40125.2 Absolute Capital Management Ltd 40425.3 Aragon Capital Management LLC 40925.4 AXA Investment Managers Inc 41025.5 Basis Capital Funds Management Ltd 41225.6 Beacon Rock Capital, LLC 41525.7 Bear Stearns Asset Management Inc 41625.8 Cambridge Place Investment Management LLP 41925.9 Cheyne Capital Management (UK) LLP 42025.10 Clarion Management LLC 42225.11 Cooper Hill Partners LLC 42425.12 DSJ International Resources Ltd (Chelsey Capital) 42425.13 Evercrest Capital (PTY) Ltd 42525.14 Forsyth Partners Ltd 42625.15 Braddock Financial Corporation 42825.16 Geronimo Financial Asset Management LLC 42925.17 Goldlink Capital Asset Management Limited 42925.18 Caribbean Commodities Ltd 43125.19 Haidar Capital Management LLC 43325.20 Lake Shore Asset Management Ltd 43425.21 Lydia Capital LLC 43625.22 Bear Stearns & Co Inc 43825.23 MDL Capital Management Inc 44025.24 Mercurius Capital Management Limited 44225.25 Goldman Sachs Group Inc 44525.26 ODDO and CIE/ODDO Asset Management 44625.27 Eiger Capital Limited 44725.28 Sachsen LB 44925.29 BNP Paribas SA 45025.30 Pirate Capital LLC 45125.31 Quattro Global Capital LLC 45225.32 IKB Credit Asset Management GmbH 45325.33 Ritchie Capital Management LLC 45525.34 Rubicon Fund Management LLP 45825.35 Sentinel Management Group Inc 45925.36 Sowood Capital Management LP 46225.37 Stratix Asset Management LLC 46425.38 Synapse Investment Management LLP 46525.39 TPG-Axon Capital Management LP 46625.40 Tribeca Global Management LLC 46725.41 Dillon Read Capital Management LLC 46825.42 UBS Securities LLC 46925.43 Union Investment Asset Management Holding AG 47125.44 United Capital Markets Holdings Inc 47225.45 Wharton Asset Management GB Ltd 473Chapter 26 Case Studies 2008 47526.1 Citigroup Global Markets Inc MAT/ASTA Funds 47526.2 Gabriel Capital Corporation 47726.3 Blue River Asset Management LLC 48126.4 Bluebay Asset Management PLC 48426.5 Carlyle Investment Management LLC 48626.6 Centaurus Capital Ltd 48826.7 1861 Capital Management LLC 48926.8 Andor Capital Management LLC 49026.9 Ceres Capital Partners LLC 49126.10 Citadel LLC 49326.11 Coadum Advisers Inc & Mansell Capital Partners III LLC 49526.12 Cornerstone Quantitative Investment Group Inc 49626.13 Citigroup Capital Markets Inc – CSO Partners Fund 49726.14 Dalton Strategic Partnership LLP 49826.15 D.B. Zwirn & Co. L.P. 49926.16 Deephaven Capital Management LLC and Knight Capital Group 50226.17 Drake Capital Management LLC 50326.18 Dreier LLP 50526.19 Endeavour Capital LLP 50626.20 Epic Capital Management Inc 50726.21 Deltaone Capital Partners Corp 50826.22 Citigroup Alternative Investments LLC 51026.23 Fairfield Greenwich Advisors LLC 51126.24 Focus Capital Investors LLC 51226.25 Fortress Investment Group LLC 51326.26 Front Street Capital Corporation 51526.27 Global Opportunities (GO) Capital Asset Management B.V. 51726.28 Barclays Bank PLC 51826.29 Gordian Knot Ltd 52026.30 Gradient Capital Partners LLP 52326.31 Headstart Advisers Limited 52526.32 Heritage Wealth Management Inc 52626.33 Highland Capital Management LP 52826.34 ING (NZ) Limited 52926.35 Insana Capital Partners LP 53126.36 Lahde Capital Management LLC 53226.37 Lawrence Asset Management LP 53326.38 Libertyview Capital Management Inc 53526.39 London Diversified Fund Management LLP 53926.40 UBS Third Party Management Company S.A. and Access Partners S.A. 53726.41 Tremont Group Holdings Inc 53926.42 Bernard L. Madoff Investment Securities LLC 54026.43 Kingate Management Ltd 54326.44 Manhasset Capital Management LLC 54426.45 Maxam Capital Management LLC 54526.46 MKM Longboat Capital Advisors LLP 54626.47 Morgan Asset Management Inc 54726.48 Oak Group Inc 54926.49 Okumus Capital LLC 55026.50 Citigroup Inc – Old Lane Partners LP 55126.51 Banco Santander SA 55226.52 Ore Hill Partners LLC 55426.53 Ospraie Management LLC 55526.54 Pardus Capital Management LP 55626.55 Parkcentral Capital Management LP 55726.56 Peloton Partners LLP 55826.57 Pentagon Capital Management PLC 56026.58 Platinum Grove Asset Management LP 56226.59 Polar Capital LLP 56426.60 Polygon Investment Partners LLP 56526.61 Powe Capital Management LLP 56826.62 Quantek Asset Management LLC 56926.63 Regan & Company 57226.64 Rockwater Municipal Advisors LLC 57326.65 Deutsche Bank AG 57526.66 Rumson Capital LLC 57626.67 Russell Capital Inc 57726.68 Windmill Management LLC 58026.69 Sailfish Capital Partners LLC 58126.70 Salida Capital LP 58226.71 Satellite Asset Management LP 58426.72 Sextant Capital Management Inc 58526.73 Standard Chartered Bank plc 58626.74 Stone & Youngberg LLC 58826.75 Galloway Capital Management LLC 58926.76 Tantallon Capital Advisors Pte Ltd 59026.77 Tequesta Capital Advisors LP 59226.78 Toscafund Asset Management LLP 59326.79 JO Hambro Capital Management Ltd 59426.80 Turnberry Capital Management LP 59526.81 First Republic Investment Management Inc 59626.82 Webb Asset Management Canada Inc 597Chapter 27 Case Studies 2009 60127.1 Scoop Management Inc & Scoop Capital LLC 60127.2 Asenqua Inc 60327.3 Astarra Asset Management Pty Limited 60427.4 Atticus Capital 60727.5 Austin Capital Management, Ltd 60927.6 Acorn Capital Management LLC 61127.7 Boston Provident LP 61327.8 Chais 1991 Family Trust 61427.9 Cerebrus Capital Management LP 61527.10 Cohmad Securities Corporation 61627.11 CRW Management LP 61827.12 Dynamic Decisions Capital Management Ltd 61927.13 Evergreen Investment Management Company LLC 62227.14 Finvest Asset Management LLC 62427.15 Galleon Management LP 62527.16 HFV Asset Management LP 62727.17 Jadis Investments LLC 62827.18 JWM Partners LLC 63027.19 K1 Fonds GBR 63127.20 Lancelot Investment Management LLC 63327.21 Locke Capital Management Inc 63527.22 Lodge Capital Group LLC 63727.23 M.A.G. Capital LLC 63827.24 New Castle Funds, LLC 64027.25 New Star Asset Management Group PLC 64127.26 Northern Rivers Capital Management Inc 64327.27 Nylon Capital LLP 64427.28 North Hills Management LLC 64627.29 Onyx Capital LLC 64727.30 Crossroad Capital Management LLC 648 27.31 Pequot Capital Management Inc 64927.32 Ponta Negra Group LLC 65127.33 Raptor Capital Management LP 65227.34 RCS Hedge Fund 65427.35 Ruderman Capital Management LLC 65527.36 Sand Dollar Investing Partners LLC 65627.37 SNC Asset Management Inc 65827.38 Solaris Management LLC 66027.39 3V Capital Management LLC 66227.40 Weavering Capital (UK) Ltd 66427.41 West End Capital Management LLC & West End Financial Advisors LLC 66927.42 Westgate Capital Management LLC 67127.43 Westridge Capital Management Inc 67227.44 S2 Capital Management LLC 675Chapter 28 Case Studies 2010 67728.1 Camulos Capital LP 67728.2 Diamondback Capital Management LLC 67928.3 Easy Equity Asset Management Inc 68128.4 Ebullio Capital Management LLP 68228.5 Frontpoint Partners LLC 68428.6 Gartmore Group PLC 68628.7 Gem Capital LLC 68728.8 Global Holdings LLC 68828.9 Grifphon Asset Management LLC and Sasquatch Capital LLC 68928.10 GSC Group Inc and J.P. Morgan Securities LLC 69128.11 Chimay Capital Management Inc 69428.12 Horseman Capital Management, L.P. 69528.13 Imperium Investment Advisors LLC 69628.14 Lanexa Management LLC 69828.15 Life’s Good Inc 69928.16 Onyx Capital Advisors LLC 70028.17 PEF Advisors LLC 70228.18 Garcia Capital Management LLC 70428.19 Goldman Sachs & Co 70428.20 Plainfield Asset Management LLC 70728.21 Southridge Capital Management LLC 70928.22 Thinkstrategy Capital Management LLC/Lilaboc LLC 71228.23 Cowen Group Inc 714Chapter 29 Case Studies 2011 71729.1 AXA Rosenberg Investment Management LLC 71729.2 Barai Capital Management LP 71929.3 Baystar Capital Management LLC 72029.4 Benchmark Asset Managers LLC, and Harvest Managers LLC 72229.5 360 Global Capital LLC 72429.6 Aethra Asset Management B.V. 72429.7 3 Degrees Asset Management Pte Ltd 72529.8 Fletcher Asset Management Inc 72729.9 Duma Capital Management LLC and Duma Capital Partners LLC 73129.10 Harbinger Capital Partners LLC 73129.11 Alnbri Management, LLC & Managed Accounts Asset Management LLC 73429.12 IU Group Inc 73629.13 James Caird Asset Management LLP 73729.14 Juno Mother Earth Asset Management LLC 73929.15 Komodo Capital Management Pte Ltd 74129.16 Leaddog Capital Markets LLC 74229.17 Liquid Capital Management, LLC 74429.18 Locust Offshore Management, LLC 74529.19 Longacre Fund Management LLC 74729.20 Michael Kenwood Asset Management LLC 74729.21 Millennium Global Investments Ltd 74929.22 Neural Markets LLC 75129.23 New Century Investment Management LLC 75329.24 O.S.S. Capital Management LP 75429.25 Paulson & Co Inc 75529.26 Pegasus Investment Management LLC 75729.27 RAB Capital Ltd 75829.28 Seatown Holdings Pte 76029.29 SHK Asset Management LLC 76129.30 SJK Investment Management LLC 76229.31 Spencer House Capital Management LLP 76429.32 Task Capital Management LLC, ARM Capital Management LLC & Vigilant Capital Management LLC 76529.33 Tontine Capital Management LLC 76629.34 Trafalgar Asset Managers Limited 76729.35 Vanquish Capital Group LLC 76929.36 WCM Capital Inc 77029.36.1 Reference Article 77029.36.2 Background 77029.36.3 Observations 77129.37 Wessex Asset Management Limited 771Chapter 30 Case Studies 2012 77330.1 Abante Capital (Proprietary) Limited and Basileus Capital (Pty) Ltd 77330.2 Tell Investments LLP 77530.3 TIG Advisors LLC 77630.4 Tradewinds Global Investors LLC 77730.5 Voras Capital Management LLC 77830.6 Bluegold Capital Management LLP 77930.7 Thaddeus Capital Management (HK) Limited 78030.8 Brickell Fund LLC 78130.9 Aletheia Research and Management Inc 782Appendix A Index of Case Studies by Investment Manager 785Appendix B UK Serious Fraud Office Hedge Fund Investor Questionnaire 793Index 795List of Funds 800List of Fund Managers 805