Study Shows Hedge Funds Improve Risk Management

New research suggests hedge funds are continuing to beef up risk management, and well they might: the report says they face 14 distinct forms of risk.

Risk Roadmap: Hedge Funds and Investors’ Evolving Approach to Risk, a study by the Managed Funds Association, BNY Mellon and HedgeMark based on interviews with chief risk officers of “leading global hedge funds,” found that 91% employed a third party administrator in some risk management capacity. Moreover, the risk officers surveyed expect that in five years, 41% of investor reporting will be published daily or weekly, up from 22% today and just 12% in 2007.

The study also found that 79% of firms now separate risk manager and fund manager functions; that 55% of firms considered liquidity risk their highest priority; that 60% of larger hedge funds have a dedicated risk management function and 84% use off-the-shelf risk analytics for portfolio management or trading.

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