Cayman Net News – Risk is an ever- present component of any investment strategy and is certainly present within the hedge fund industry. Traditionally focused more on controlling investment-related risks, the hedge fund industry if compared to say the mutual fund industry has placed a somewhat lower emphasis on the operational risks associated with the ongoing administration of funds.
With a longer operating history, greater regulatory oversight, and relatively simplified and standardized investment programs, mutual fund complexes have had in place fairly robust operational controls for years. Hedge funds, on the other hand, have a shorter operating history and more varied and complex investment programs. The main emphasis has understandably been generating performance efficiencies with operational risk perhaps a secondary consideration.
There is greater evidence that the Cayman Islands’ domiciled fund administrators are viewing operational risk management as a key business distinguisher and therefore high on their strategic goals.
There are a few important drivers for this trend; firstly, closer scrutiny has been directed towards the fund administrators by portfolio managers and institutional investors. They are demanding greater transparency around the overall design and effectiveness of the internal control environment of fund administrators.
