NEW YORK, Dec. 13, 2017 /PRNewswire/ -- Corgentum Consulting, a leading provider of integrated operational due diligence reviews and background investigations, today announced the results of a hedge fund investor and analyst survey.
According to the findings, only 16% of investors feel that administrators continue to remain the most important hedge fund service provider. Similarly, an even smaller group (12%) stated that auditors were the most important. Prime brokers (34%) and cybersecurity consultants (29%) were identified as the most valuable providers to this market.
When responding to the survey, investors and operational due diligence analysts in particular felt the role of administrators and auditors had become increasingly commoditized. When performing due diligence on hedge funds, many investors didn't feel there was a notable difference among the work of leading firms in either the administration or the audit space.
"This administrator and auditor fatigue represents a notable investor attitude shift from previous surveys. This is surprising because investors are increasingly relying on administrators and auditors in the areas of valuation and asset verification. By minimizing the importance of the oversight work of these providers, investors expose themselves to the risk of under weighting key operational and investment risks in the hedge funds they invest in," said Jason Scharfman, Managing Partner of Corgentum Consulting.
Increased interest among funds in cryptocurrencies such as Bitcoin, and the incorporation of blockchain technologies for trading and research were reasons cited by multiple investors for the growing importance placed on trade clearing and brokerage relationships. Other key reason investors cited for upgrading the importance of hedge fund prime brokers were increases in market volatility coupled with the growth in trading volumes fueled by quantitative strategies enabled by artificial intelligence.
The survey data also showed growing fears among investors related to hedge fund cyberattacks, cloud integrity and the increased regulatory focus on cybersecurity. These concerns contributed to notable increases on the importance investors placed on hedge fund technology vendors. Similarly, 41% of investors felt one of the biggest risks facing hedge funds was the reputational and financial damage that may be done from a cyberattack carried out on a vulnerable hedge fund service provider.
Additional findings include:
- Hedge fund reputational risks continue to remain in focus. 38% of investors indicated that within the past year they have expanded the scope of their background investigation research during due diligence. Furthermore, 62% indicated that they have initiated ongoing investigative due diligence monitoring efforts within the past year.
- Hedge fund investors biggest concerns for 2018 included increased regulatory complexity (31%) and ongoing valuation concerns (28%). Investors further indicated particular concerns related to the challenges hedge funds faced in complying with the upcoming implementation of the European Markets in Financial Instruments Directive II (MiFID II), the General Data Protection Regulation (GDPR) and the Packaged Retail Investment and Insurance-based Products (PRIIPs) regulations.
The results of the survey were first presented exclusively to premium subscribers of Corgentum's monthly newsletter, Due Diligence News. Respondents represented a wide variety of hedge fund investors and operational due diligence analysts ranging from ultra-high net worth individuals and family offices to fund of hedge funds, pensions and endowments.
To learn more about Corgentum's survey data and newsletter contact us about signing at Corgentum.com/contact or email us directly firstname.lastname@example.org. For more information on our industry leading operational due diligence and background checks on all fund managers including hedge funds read our blog, and follow @Corgentum on Twitter.
About Corgentum Consulting
Corgentum works with institutional investors including fund of funds, pensions, endowments, investment consultants, and family offices to create highly customized, deep-dive operational due diligence reviews and background investigations. The firm's operational due diligence process is specifically tailored to address the operational risks of each investment strategy under review. Corgentum analyzes all fund strategies globally including hedge funds, private equity, real estate funds and traditional funds. Corgentum's focus on operational risk has allowed the firm to develop forensic quantitative and qualitative analysis techniques to enhance the depth of investor's due diligence. For more information visit www.Corgentum.com