Tags: hedge | fund | liars

Study: Some Hedge Fund Managers Lie

By    |   Friday, 16 Oct 2009 10:01 AM

One in five hedge fund managers misrepresents their fund or its performance to investors during formal due diligence investigations, according to research from New York University's Stern School of Business.

Researchers found that the most common misrepresentations by hedge fund managers was the amount of money they had entrusted to their funds; one manager told investigators his fund had $300 million more under management than it did.

Performance and regulatory and legal histories are also often misrepresented, reports the Financial Times.

According to one of the report’s co-authors, another fund was found to have lied about the unblemished legal records of its partners, both of whom had criminal records for having stolen a Chinese junk.

Researchers also noted “misrepresentations or inconsistencies” in 42 percent of due diligence reports, about half of which occurred because managers were unfamiliar with their funds’ internal procedures and legal processes.

The study looked at funds with up to $8 billion in assets under management and at managers with an average of 19 years of experience in the industry.

The pace for launches of new hedge funds is accelerating, but start-ups are having a tough time competing for investors’ money and beating already established funds.

"The number of start-up proposals that come by our desk each week is consistent with what we saw in earlier times, but the amount of capital they're starting with is much smaller," Goldman Sachs Group global co-head of global securities services John Willian told Reuters.

"Very few funds will have over $1 billion at their launch."

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One in five hedge fund managers misrepresents their fund or its performance to investors during formal due diligence investigations, according to research from New York University's Stern School of Business.Researchers found that the most common misrepresentations by hedge...
hedge,fund,liars
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2009-01-16
Friday, 16 Oct 2009 10:01 AM
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