Hedge funds fail from operational not investment risk, says survey

Professional Adviser
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survey tells investors to change due diligence focus to back office process as much as investment strategy

An alarmingly high number of hedge funds fail because of operational issues rather than investment risk, according to a recent hedge fund study. Carried out by financial services consultancy Capco, the study of 100 hedge fund failures over the past 20 years found 50% come from operational risk rather than bad investment decisions. The finding has important implications for investor due diligence, which has traditionally focused on management, suggesting an equal weighting should be put on back-office systems. There are around 6,000 hedge funds worldwide with an estimated E600bn...

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