Hedge fund risk management

In the famously secretive hedge fund industry, transparency – at least in terms of risk reporting and risk management – is gaining importance. The reason is simple: hedge funds’ growing investor base, particularly pension funds, demands clarity on risk management.

While some hedge fund managers are happy to disclose risk-related information, others are less inclined. However, with pressure from pension fund investors and new regulations from the US Securities and Exchange Commission on the way, improved transparency and risk reporting will become de rigueur. Funds are already starting to upgrade their risk management systems to meet investors’ information requirements (see page 18).

Hedge funds claim to generate impressive returns in any