I've noted that a sea change has taken place in the hedge fund industry since the financial crisis.
The power pendulum has swung in favor of limited partners, who have had the upper hand when it comes to gating policies, compliance, third-party administration and the like. That relatively new influence is being felt again in the wake of the Libor scandal.
As of now, hedge funds have yet to be implicated in the scandal that has ensnared Bank of America, JPMorgan Chase, Barclays and others. But limited partners want assurances that there are no hidden exposures or risks, so they are essentially demanding clean bills of health.
"Some investors are so concerned about the reputational damage and the difficult questions their own clients would pose if hedge funds they had invested in were to be implicated that they are demanding the managers show they have a clean record," reports Reuters.
Some hedge funds have "spent at least the past six months trawling through emails, voicemails and phone calls their traders made during the relevant periods. At least one fund has employed a sophisticated computer algorithm: to discover whom its traders talked to and whether, during the course of those conversations, they discussed Libor fixings with traders at banks."
I can only hope that hedge funds remain out of the fray. If a fund were to be implicated, it would be a rank disaster in this day and age.
For more:
- here's the article
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