“We do see more activity within closed-end funds, which can be viewed as a hybrid between a mutual fund and a hedge fund,” said Giordano when asked how alternative investment managements can grow their businesses in times like these. “A privately offered closed-end fund may allow a manager to replicate many of the same types of strategies that a hedge fund manager would run in a nonregistered fund. In addition, the manager can also get a performance allocation on their assets, unlike mutual funds where you might have to go with a fulcrum fee. And, as we all know, the Securities and Exchange Commission is not a big fan of fulcrum fees.”
Giordano further suggested that managers be more proactive about their risk management efforts rather than wait and examine their risk in hindsight once disaster strikes.
“The due diligence questionnaire (DDQ) is one of the documents that ties it all together, not only how you run your portfolio, but how you actually raise assets from the various constituents you are targeting,” said Giordano. “It is very important for a manager to articulate those risk parameters very clearly in the DDQ because, generally, you will not find them in the offering documents.”
Opalesque says its roundtable series “unites some of the leading hedge fund managers (single and multi-strategy managers) as well as representatives of the local investor base (institutions, fund of funds, advisers) to gain unique insights into the specific idiosyncrasies and developments, the issues and advantages of the highlighted hedge fund centers.” To view previous roundtables, visit the Opalesque archives here.
Giordano and the rest of the Investment Management Practice Group were recently honored by the editors of Chambers USA with the “2011 Award for Excellence” in the Investment Funds category for outstanding achievements in providing legal services to a broad array of managers of hedge funds, mutual funds, private equity funds, and other types of investment funds and investment advisers throughout the world. Bingham clients surveyed by Chambers said the firm’s Investment Management Practice Group “is in a league of its own.”