Even before the Bernard Madoff scandal made it a regulatory priority, investors were increasingly concerned about the amount of information disclosed by hedge funds.
The Edhec poll, conducted last summer, found that four in five hedge fund managers and investors believe that liquidity risk is not sufficiently captured by hedge fund reporting. The respondents also said there is a correlation between the quality of hedge fund reporting and the quality of the hedge fund itself.
The French business school also found profound areas of disagreement between hedge funds and funds of funds on one side, and their clients on the other. Managers believe that information on risk-adjusted returns is what investors are looking for. Not so: Investors say they are most interested in past returns and information on extreme risks.
Nor did the poll find much faith in best-practices guidelines being promulgated by some industry groups.
The standards “rarely provide guidance on sound hedge fund disclosure,” the study said. “Many of the guidelines are vague and cover topics that are already standard disclosure.”
Edhec interviewed 214 hedge fund managers and investors for the survey.