As assets managed by hedge funds continue to grow rapidly, sponsors are adjusting their risk management strategies to manage growth in a way that safeguards the firm's reputation and maintains operational efficiency. However, firms are tailoring their risk management programs to achieve a good balance between fostering growth and insuring proper control over investment and operational risks.
PricewaterhouseCoopers' second hedge fund survey includes 68 firms who manage over $225 billion and range in size from $50 million to $10 billion and encompasses a wide range of investment strategies. The objective of this survey is to understand the different approaches adopted by leading hedge fund firms to address the evolving requirements for consistency and reliability in all areas of valuation and risk management.
The survey focuses on:
- Governance and organisation
- Valuation and financial risk management
- Operational risk management
- Regulatory and legal risk
The results of the survey:
- Confirmed that the hedge fund industry is a maturing one and is being driven by a combination of regulatory bodies and large investors to continue to become more institutionalized;
- Demonstrated most firms regard themselves as high quality in terms of basic valuation and risk management techniques, although, the number of personnel and the degree to which procedures are formalized varies significantly; and
- Identified some key areas where larger hedge fund firms can improve internal controls without adding significant new infrastructure.
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