Best Practices

Judge Drain: Make That ‘Make Whole” Clause Explicit and Clear

Sep 7th, 2014 | Filed under: Alpha Strategies, Best Practices, Insolvency, Today's Post

Judge Drain didn't actually accept the Momentive plan, but it now seems likely he will accept some very similar plan in due course. What is key is that the objections that he found had unconvincing represented until then the conventional wisdom among much of the bar devoted to the service of event-driven litigators.


Regulatory reporting – key considerations for fund managers and service providers

Jul 15th, 2014 | Filed under: Best Practices, Hedge Fund Operations and Risk Management, Regulatory, Today's Post

Keeping track of the AIFMDs, FATCAs without drowning in the alphabet soup is hard work. A new paper from Grant Thornton offers some ideas on how to wade through the soup while you're looking for alpha.


Time for the Alternative Investment Industry to Grow Up

Jul 10th, 2014 | Filed under: Alpha Strategies, Best Practices, Today's Post

Guest columnist Bob Swarup, CAIA, looks at good governance and best practices and what the alternative investment industry needs to do to "grow up."


In-house [Im]Prop[er] Trading: Proceed with Caution

May 29th, 2014 | Filed under: Best Practices, Today's Post

Guest columnist Ginger Szala looks at the conflicts of interest in trading.


Index Provider Transparency: End Users Unimpressed

May 19th, 2014 | Filed under: Academic Research, Best Practices, Indexes, Today's Post

Europe's index providers, by their own account, already have strong incentives to offer optimal transparency and, in their self-interest, they do so. A survey and report from EDHEC examines this claim.


Hedge Funds: The Transparent, the Opaque and the Tiered

May 18th, 2014 | Filed under: Best Practices, Performance, Analytics & Metrics, Today's Post

Seventy-one percent of private equity/real estate investors, and 89% of hedge fund investors, say they have decided against investing in at least one new fund due to their concern over its lack of transparency.


The Yin and Yang of Executive Compensation

Apr 1st, 2014 | Filed under: Alpha Strategies, Best Practices, Regulatory, Today's Post

The lesson for investors in the new Wachtell Lipton document may simply be that a corporation that is careless about compensation at the highest level, that cannot carefully document the reasons for payouts, is asking for trouble and that one must consider whether the market has fully discounted the trouble.


Mutual Fund Whistle Blower Case Will Proceed

Mar 9th, 2014 | Filed under: Best Practices, Regulatory, Today's Post

Lawson, the whistle blowing employee of an investment advisor, is protected by SOX. Six Justices agreed on that, although they disagreed on exactly why, or on how far the implications might take future courts.


Increased Tax Rates and the Net Investment Income Tax – A Galactic Collision of Forces

Feb 17th, 2014 | Filed under: Best Practices, Partner accounting, Today's Post

Maury Cartine, CPA, JD, Partner in Charge of Alternative Investment Group Tax, Marcum, LLP, looks at the tax changes and what this means for managers and investors.


IOSCO Cautions About Fragmentation

Dec 17th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

The IOSCO has recommendations for market authorities as to trade execution services. These recommendations are driven by a general sense that technology has brought about increased fragmentation and that this, unless carefully monitored, is a dangerous thing.


Celent: Back Office to the Front Burner

Dec 10th, 2013 | Filed under: Best Practices, Infrastructure, Today's Post

A new report, which concerns specifically the post-trade operations of equities and fixed income instruments, says that since the crisis of 2008 the management of costs has become "an utmost priority." Cost management, though, isn't the same as downsizing.


AIMA: Valuation Sound Practices Updated

Oct 17th, 2013 | Filed under: Asset pricing, Best Practices, Today's Post

Challenges brought about by the 2007-08 crises and their long wake have interacted in the U.S. with what was then a new fair-value hierarchy, the three levels of valuation as established by the FASB.


On Two Quantitative and Objective Execution Benchmarks

Oct 1st, 2013 | Filed under: Best Practices, Performance, Analytics & Metrics, Today's Post

As a matter of fiduciary responsibility and best business practice, Woodbine says, firms need to conceive of a trading strategy that will optimize their trade execution against objective and quantitative benchmarks, and connect with counterparties who will advance this goal.


Principles as Abstractions: The AIMA Offers a Canvas

Sep 9th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

On the too-big-to-fail front, for example, AIMA observes that risks associated with the failure of any particular entity "should be adequately addressed...." That is quite unobjectionable. All problems should be adequately addressed.


Building a Successful Fund Firm From the Start

Aug 21st, 2013 | Filed under: Best Practices, Commodities, CTA, Hedge Fund Industry Trends, Hedge Fund Operations and Risk Management, Performance, Analytics & Metrics

Grant Jaffarian, AlphaTerra LLC, discussed the importance of messaging


A Shotgun Apartment for Wealth Managers

Jul 29th, 2013 | Filed under: Best Practices, Hedge Fund Industry Trends, Today's Post

Celent reports that for many wealth managers the nature of market conditions, and in particular the ever more strenuous compliance demands, have pressed them to make more effective use of the technology portion of their budget, from the front office to the back. We give some thought to the implicit imagery.


Marketing Closer or Poseur? How to Identify the First and Avoid the Second

Jun 13th, 2013 | Filed under: Alpha Seekers, Alpha Strategies, Best Practices, Hedge Fund Industry Trends, Today's Post

Guest columnist Diane Harrison takes a hard look at asset raising and the people who do it.


Supreme Court Accepts Fidelity Whistle-Blower Appeal

May 30th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

One case now before the U.S. Supreme Court poses the issue of the proper interpretation of the whistle-blower protection offered by Sarbanes-Oxley. The underlying problem is that when Congress wrote that statute it had in mind operational companies like Enron, or WorldCom, or Tyco International. The very different world of investment advisers and their funds, [where the public entities are the funds proper which employ no one], wasn't on its collective mind.


Abstraction, Patents, and the Latest Alice Ruling: A Scorecard

May 16th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

The Federal Circuit's effort to address en banc the district court's rejection of the applicability of patent law to a fairly commonplace hedge against settlement risk seems to have broken down in confusion. This may have profound implications for both the traditional and the alternative asset management industry.


Intellectual Property Rights in Software: Go Ask Alice

Feb 13th, 2013 | Filed under: Best Practices, Regulatory, Timely Research, Today's Post

Lawyers argued an intellectual property issue of great significance to our readers before the Federal Circuit Court of Appeals en banc, on Friday, February 8, 2013. They were disputing a patent claim that, if upheld, will make life a lot more complicated than it already is for those attempting to provide the infrastructure of the alternative-investment industry.


Risk Management versus Risk Mitigation & Absolute Return versus Hedge Funds

Jan 31st, 2013 | Filed under: Alpha Strategies, Best Practices, Editorial, Hedge Fund Industry Trends, Today's Post

Rene Levesque looks at risk management and absolute return from an industry practitioner's point of view.


DRC: Finding Red Flags in the ADVs

Jan 24th, 2013 | Filed under: Best Practices, due diligence, Today's Post

Fifty-eight percent of the pension investment consultants included in a recent report have one or another sort of red flag in their present or their past: many of them because they run their business in a way that generates conflicts that ought to be of concern to pension plan sponsors.


Delaware Struggles with Corporate-Auction Questions: Don’t Ask

Jan 14th, 2013 | Filed under: Best Practices, Regulatory, Today's Post

The directors of a corporation selling itself have a duty to their shareholders to familiarize themselves with all the material facts, and they are to be discouraged from stuffing wax in their ears in order to avoid hearing anything inconvenient.


You’ve made finals! Now, how do you get an edge?

Sep 27th, 2012 | Filed under: Alpha Hunters, Best Practices, Institutional Investing, Today's Post

Charles J. French, CAIA, discusses the intricacies of negotiating finals with Christopher Van Dyke, CAIA, CFA, Advisor, Arnerich Massena, Inc. (CVD); Kweku Obed, CAIA, CFA, Principal, Mercer Investment Consulting, Inc. (KO); and Thomas H. Dodd, CAIA, CFA, FSA, President, Stratford Advisory Group (TD).


Disclosures and Paperwork Burdens Under Fair Value Rules

Sep 19th, 2012 | Filed under: Best Practices, Regulatory, Today's Post

As a McGladrey white paper issued this spring makes clear, reporting entities now must disclose quantitative information about the unobservable inputs used in Level 3 Fair Value measurements. These may include: prepayment rates; credit risk adjustments; default rates; control premiums; loss severities.


The Rise and Rise of Operational Due Diligence

Aug 6th, 2012 | Filed under: Best Practices, Today's Post

Shane Brett takes a look at operational due diligence and recommends letting the sun shine in.


The Libor Scandal Is Becoming a Central Bankers’ Scandal

Jul 17th, 2012 | Filed under: Best Practices, Timely Research, Today's Post

After an October 29, 2008 discussion with Tucker, Diamond wrote a note for the file saying that the Bank of England official had said that "it does not always need to be the case that we appeared as high as we have recently" in connection Barclays' Libor submissions. What are we to make of this?


PwC: Open Books Will Rebuild Trust for Hedge Funds

Jun 26th, 2012 | Filed under: Best Practices, Hedge Fund Industry Trends, Institutional Investing, Today's Post

The return of assets to the realm of hedge funds comes with enhanced scrutiny. As Todd Groome, chairman of AIMA, says: “Following 2008, a much greater investor focus on liquidity, portfolio transparency, control and fund governance was clearly evident.” In common with legislative/regulatory changes, this requires transformation.


Sound Alternatives Practices in the Great White North

May 29th, 2012 | Filed under: Best Practices, Hedge Fund Regulation, Today's Post

The meat of the guide addresses what AIMA Canada considers sound practice in marketing and promotion, such as in the calculation and presentation of returns, in selecting a benchmark relevant to a specific strategy, and in explaining the various ratios used for the same purpose. It notes that the Association for Investment Management and Research’s Performance Presentation Standards (AIMR-PPS) recommend using a time-weighted method for the calculation of returns, a model otherwise known as the Modified Dietz method.