Hedge Fund Investors Say Administrators Count; Prime Brokers Don't
When it comes to who is the most important service provider for hedge funds: administrators and auditors outdo prime brokers hands down in the eyes of investors.
So says a study just released by hedge fund operations consultancy Corgentum Consulting. Only 17 percent of investors felt that prime brokers were the most important service provider while 33 percent said that administrators were and 31 percent said that auditors were.
"After the Lehman Brothers disaster, many investors placed significant importance in their role of prime brokers," says Jason Scharfman, managing director at Corgentum in Jersey City, NJ. "The survey data indicates a potentially dangerous shift in the opposite direction, signifying that investors have reverted to their old ways and are devaluing the role of prime brokers."
When asked who investors felt service providers had their primary allegiance to the vast majority -- 74 percent -- felt administrators are committed to investors. "This highlights a surprising disconnect between the operational realities of hedge fund investing versus investors' beliefs because administrators are hired and compensated by hedge funds, not investors," says Scharfman.
Additional findings include: investors are most worried about capital loss and operational risks. That's a pretty big change from the lttyoretswtiche
However, they are minimizing the importance of cash management -- only 14 percent thought it was important. Only 7 percent of respondents thought fund governance was important.
The respondents to Corgentum's survey represented high net worth individuals; family officers; funds of hedge funds, pensions and endowments.
Written by Chris Kentouris, Editor-in-chief (Chris can be contacted through Chris.Kentouris@hotmail.com).